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The Upside of Down Markets

Five steps to help you win with clients when the markets are losing

 

 

 

Creating a Silver Linings Action Plan

We all know that being proactive and having a plan makes most things run smoothly. A good plan touches on your goals, the steps to achieve them, the tools you'll need and how to overcome obstacles. Usually the best time to make a plan is before you need it. After all, you want to know where the exits are when you smell smoke. Volatile markets, like fires, can cause anxiety and lead to poor decisions, so now may be the time to develop an action plan.

Determine the Goals of Your Plan 
Having a proactive plan is one way for skilled advisors to prove themselves and build lasting relationships. 
The first step in developing a plan is to think about your goals, which could include the following:

  • Prepare clients for the next volatile market to calm their fears. 
  • Demonstrate your value by being proactive and attuned to client and prospect needs. 
  • Stand out from other advisors with potential prospects. 
  • Assess and reposition portfolios before the market turmoil strikes.

Implement Your Plan 
Once you have determined your goals, take the steps below to implement your plan. To help you, we've put together lists of suggested actions, tools and resources you can make use of for each step.

 

  • Prepare Client Communications

  • Build Your Audience List

  • Provide Educational Materials

  • Assess Clients' Portfolios

  • Analyze Your Investment Managers

Prepare Client Communications

Step 1

Prepare your client communications

Discussing how to respond to a market slowdown is a conversation that can be tough to have. Even the mention of a downturn can be scary. While many clients realize that the market can't go up forever, the reality of a bear market can push clients into making poor decisions. Preparing your clients for volatility now may help reduce anxiety when the market drops. Knowing what to expect can instill confidence. Talking to your clients about volatility can be easy. You can use our "Buy Low, Sell Why?" flyer, which explains why staying invested and sticking with their plan can help them pursue their goals. It's easy to show clients that despite bear markets (represented by the red parts of the line in the illustration below), the market moves higher over time and that selling out of the market can be detrimental.

You can refer to the chart below as you kick off the conversation by asking your clients the listed questions.

Buy Low, Sell Why?

History of Dow Jones Industrial Average, 4/28/42 - 12/31/23*
Line chart with 30 lines.
The chart has 1 X axis displaying Time. Range: 1940 to 2023
The chart has 1 Y axis displaying Dow Jones Industrial Average (Logarithmic). Range: 1 to 5.
Chart annotations summary
  • 128.7%
  • 85.7%
  • 66.6%
  • 38.0%
  • 72.5%
  • 29.1%
  • 351.4%
  • 31.2%
  • 354.8%
  • 32.4%
  • 75.7%
  • 250.4%
  • 395.7%
  • 94.4%
  • 97.9%
  • -24.0%
  • -25.2%
  • -45.1%
  • -24.1%
  • -21.2%
  • -31.5%
  • -37.1%
  • -27.1%
  • -35.9%
  • -26.9%
  • -36.1%
  • -29.7%
  • -53.8%
  • -21.9%
Highcharts.com
End of interactive chart.

Investing for the long term and having a disciplined plan can help you work toward reaching your goals. 

 

Source: SPAR, FactSet Research Systems Inc.
Past performance is no guarantee of future results.
*Dow Jones Industrial Average, 4/28/42–12/31/23.
Returns are shown based on price only. It is not possible to invest in an index.
The Dow Jones Industrial Average (DJIA) measures the US stock market.



Reaching out to clients can show them that you're prepared and thinking of their needs.


Conversation Starters

Question "Looking at the bear that started in ____, with the benefit of hindsight, what could you have done?” 

Insight Emphasize that either of the typical answers, buy more or wait it out, are good.


Question "Is the line in the chart generally going up or down? Does the market spend more time in bear markets (red parts of line) or bull markets (blue parts of line)? Can you see how the market was able to rebound after declines? Given this historical perspective, what should an investor do when markets decline?"

Insight Point out two recent bear markets that most clients remember — the dot-com bubble and the financial crisis. Underscore that making emotionally driven decisions during bear markets can be counterproductive.


Question “When the next bear market occurs, we won't have the benefit of hindsight, but what do you think you should do when the market declines?

Insight  Drive home your point with this question and write down what they say. When the market drops, call your clients to answer any questions and give your perspective. Then ask, “When we talked about bear markets a few weeks (or months) ago, you said your plan was to wait it out (or buy more or move some assets to stocks). Do you still think that’s the right plan?

Start planning today to turn adversity into opportunity.


Start Planning Today

Given today's uncertainty, now may be the time to prepare for market volatility. Our volatility resources web page has educational material, practice management tips and investment insights to help you navigate changing markets.

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Strength Over Time

By setting realistic expectations of what can happen, your clients can potentially be better prepared. Take the time to reflect with them on decisions made in the past that didn't pan out and discuss what they can do differently this time.

Learn More

Build Your Audience List

Provide Educational Materials

Assess Clients' Portfolios

Analyze Your Investment Managers

This material should be used as helpful hints only. Each person’s situation is different. You should consider your client’s financial needs, goals, and risk tolerance before making any investment recommendations. 

Past performance is no guarantee of future results. Keep in mind that all investments carry a certain amount of risk, including loss of the principal amount invested.  Asset allocation or diversification does not guarantee a profit or protect again a loss.

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