Your client's portfolio is affected by market volatility. How can you meet their expectations?

I love what you say here Sloane Ortel. I once had a French language teacher who always said "Tout depend du context" - same goes for investing decisons.

To meet client expectations amid market volatility, maintain transparent and proactive communication, explaining the situation and its potential impact on their portfolio. Reassess and adjust their investment strategy to align with their risk tolerance and long-term goals, possibly diversifying assets to mitigate risk. Implement risk management techniques, such as stop-loss orders and hedging, to protect against significant losses. Regularly review and rebalance the portfolio to ensure it remains aligned with the client’s objectives. Provide educational resources to help clients understand market dynamics and the rationale behind your strategy, fostering trust and confidence.

Some learnings that I have had while addressing market volatility brought on by various factors are: Disruption in Supply: Communicate and empathize with the teams involved. Share how we are doing our best and making the most of resources and innovation to ride out the challenges. Health Scare: Implement steps to protect everyone concerned and share how others can help. Discuss how some have made a real difference by giving their all, while also addressing the factors that allow for work to continue as best as it can. Negative Feedback: Respond to feedback in a calm and balanced way. Assure the discontented that we take the issue seriously and are committed to rectifying it through processes, people, and plans.

We all know the saying to buy low and sell high. It is market volatility that enables us to do that. Maybe the greatest mistake some investors make is to let their emotions guide their strategy. They end up selling low when they are fearful and buy high when everyone is greedy. Warren Buffett built an incredible track record by buying when everyone was fearful and selling when everyone was greedy. Celebrate market volatility; buy low and sell high.

Everything depends on context, but in general it would be foolish to reflexively diversify after experiencing a significant drawdown. The pain of this is often most acute at the moment the client hops on your calendar. In my experience, those moments often correlate to extremes in market sentiment which create “buy the dip” opportunities in the short term. The thing to focus on is understanding the client. Was their portfolio sensibly constructed in the first place? Did you fail to help them understand the risks they’re exposed to properly? If so, shame on you. Take a beat before you mess with portfolios, and instead dig in and identify where exactly you failed to understand the client properly.

Someone else is talking to your clients about investing, whether it's the TV, their neighbor, or some competing adviser. And if you don't check in with them, you are abrogating your responsibilities as their adviser. However, I would shy away from spending a bunch of time talking about economic indicators. We always focus in on what's going on in their lives so that we can make sure they are really willing and able to take long-term investment risk. If you spend your scarce and precious time with clients talking about macro junk like the fed, there's a good chance you're not really listening to them the way you should.

Educate clients on market dynamics to provide perspective and reduce fear. Reinforce their financial plan and long-term goals to prevent impulsive actions. Promote a long-term investment view and the benefits of staying invested. Regular communication and reassurance are key, especially during downturns. Diversify portfolios to mitigate risks and use behavioral finance techniques to manage emotions. Providing emotional support helps clients stay rational and focused on their goals.

Your clients' emotional experiences are real and worth taking seriously. It's all well and good to talk about avoiding herd mentality, but isn't it more important to understand what's making them anxious and work towards building a portfolio that doesn't? One of the things we've observed is that clients have an easier time sticking with their portfolios when they align closely with their ethics.