By Chuck Cumello
As the country watches the daily drama play out in Washington, D.C., financial advisors find their already challenging jobs getting harder. The political vitriol and division that is challenging our country has been widely discussed and is on display daily, if not hourly. A client’s political affiliation is affecting their views on the markets and their portfolios in a more dramatic fashion than I have seen in almost 30 years.
It is often said, and is quite accurate in my opinion, that a financial advisor’s greatest challenge is managing the emotional and psychological challenges that beset clients when looking at their portfolios. They must manage the actions that a client wants to make based on the swings of the pendulum between “fear" and "greed.”
The raw emotion of the political drama in Washington is adding a new and visceral variable for advisors. Depending on each client’s political leanings, emotions can range from the belief that the end of the world is upon us to inquiring about how much they can borrow to extend their equity positions. Trying to help clients stick to the agreed-upon long-term plan to help them achieve their financial and life goals can be challenging under “normal” circumstances. One would be hard pressed to use the word “normal” in our current political climate.
However, the reality is that there is always something not “normal” that affects the investment universe. Whether it be geopolitical events, economic or financial shocks, or just a good, old-fashioned sell-off in the markets. This is just the latest issue and, in a world of social media and President Trump, one that seems to happen 24/7.
Although it can be challenging, some steps financial advisors can take to manage client emotions include:
- Staying calm, collected, and objective in client meetings and conversations
- Being well read and educated on all the current issues so their knowledge can be a calming influence in a client’s life
- Being flexible in their approach and understanding of a client’s emotions
The market’s performance given this environment seems to be a good reminder that the market is forward looking. The hope for a lessened regulatory burden, more business-friendly policies and tax reform, a growing (albeit slowly) U.S. economy, signs of growth in other areas of the world, generally strong corporate earnings, and low interest rates all lend themselves to the bull market continuing its run.
That is not to say there aren’t a host of things that can upend the markets and bring volatility back to the table, which is why the advisor’s role in clients' lives has never been more critical and difficult. The raw emotions of the political situation, which can swing 180 degrees from a meeting in the morning to a meeting in the afternoon, is a new element that financial advisors must account for.
The best advisors always use times of stress or instability to cement their relationships with their clients. They never shy away from difficult or challenging conversations; they embrace them and use these events as opportunities. An opportunity to reinforce and clearly prove the critical role they play in their clients' lives. An opportunity to review their client’s financial plan and to fully engage their clients on their agreed-upon commitments to achieve the goals set forth by that client and their family. Every advisor’s ultimate goal is to be seen as indispensable to their clients. Times like this give the best advisors the opportunity to retain a client, and their family, for life.
Chuck Cumello is the president and CEO of Essex Financial