Updated June 28, 2022, at 10:43 AM
Rising inflation. Surging energy prices. Global supply snags. The fear of a drawn-out war in Ukraine. These factors and more can make life uneasy for anyone paying attention to the markets.
All we need to do is look towards the VIX—the index designed to track S&P 500 volatility—to see how investors feel about the market’s direction.
The VIX, or “Fear Index” as its known, tracks fear and stress in the stock market, and it’s been up and down lately. The greater the number, the more uncertainty and fear. And levels above 30 indicate “tremendous uncertainty.”
In mid-June 2022, the VIX peaked at 34.02 on June 13 and hovered between 29.62-34.02 for over a week. As of this writing, it’s since subsided to sub-27 levels but continues to seesaw in action. Meaning the market isn’t stable and volatility is still a big concern.
Clients are likely feeling this uncertainty, but they don’t need to face it alone. If you have clients worried about market volatility, we’ve outlined some thoughts you might consider sharing with them to help ease their worries and offer peace of mind in their financial choices.
1. Remember the Long-Term Goals
Market volatility doesn’t make anyone comfortable, but when the market is acting wonky, it’s good to remind worried clients that overreaction and emotional decision-making can lead to investment pitfalls they ultimately want to avoid. There are financial benefits for looking through the long-term lens.
Think back to 2008-2009: when the financial crisis struck, the market plunged but ultimately rebounded, giving way to the biggest bull run in history. It’s almost impossible to time the markets, so if clients have time to recover, they should remember there’s time to recover for many of us and that goals can still be achievable.
2. Resist the Urge to Check
*Checks phone at 9:30 AM.*
Then again at 11 AM. And 2 PM. And right before the market closes. That’s precisely what you don’t want clients doing. It’s hard to ignore all the articles and market information out there, but sometimes it’s best to encourage clients to turn off the TV, silence the stock app notifications, and un-bookmark Marketwatch.com from the browser.
This leads back to our first point of emotional, knee-jerk reactions. Obsessing over market movements can lead to unneeded panic and bad decisions. Urge clients to keep an eye on the markets and economy, but don’t get consumed by it.
3. Think About Ways to Protect Assets
Long-term views in mind, other vehicles can prepare clients for retirement. Have them start thinking about other options that protect them from market instability.
Annuities like fixed index annuities (FIAs) or fixed index-linked annuities (FILAs) might make sense for clients to keep them engaged with the potential market gains and protect by mitigating the impacts from significant market losses drops.
4. Keep Attention on What We Can Control
No one can control or fully predict market volatility, so there’s no real reason to waste mental energy on it. If a client is hellbent on watching a volatile market and won’t let it go, try to turn their focus on things they can control, like their investment mix, allocations, and contributions.
We’ve heard success stories with this “distraction method,” so it’s worth a shot if your client just called for the third time this week about their portfolio’s performance.
5. Offer Techniques to Combat Skeptical Thoughts
Clients can often get stuck in a performance-first mindset. But in a volatile market, that’s not always a good thing. Instead, use some planning techniques that look at the bigger picture to help clients realize they’re still on track. Try using:
- Goal funding: Check the funding status of clients to look at whether their goals are still being reasonably funded.
- Decision modeling: Instead of selling off assets, try an exercise where you might, for example, shift resources around to help achieve more meaningful and higher priority goals.
- Monte Carlo analysis: You can run hundreds of random market scenarios to show clients their probability of success is likely much higher than they may feel.
6. Prepare Clients for What May Happen Next
It doesn’t matter if a client’s portfolio is picture-perfect for the scenario during market volatility—they’ll still feel the market movements. During this time, think about preparing clients for what might be on the horizon, whether that’s a big bull run, prolonged volatility, stable but steady growth, or even the next bear market.
The better you prepare your clients and that they understand the factors at play, the easier your relationship with them will be.
7. Try to Keep the Glass Half Full
Remind clients that, historically, markets rebound and have been more positive than negative over the years. According to The Balance, from 1980 to 2021, positive stock market returns happened 35 out of 42 years, or about 83% of the time. Encourage your clients to look at markets through this lens, and they’ll be less likely to be anxious or overwhelmed by a less than ideal situation.
One Last Tip…
Be a good listener. Times of uncertainty can weigh on clients. But you’re the seasoned pro, so reach out to them during rocky times. Identify which clients may be higher and lower risk about the volatility, and reach out to the high-risk ones first to let them know you’re available and ready to help.
This time is about you, your clients, and your people skills. You probably don’t have all the answers, so this is a time to reflect and listen. What do your clients feel? What fears are they having? Where do they want to go from here? Let your clients get everything off their chest, and then you can develop a plan to minimize their concerns.
For Financial Professional Use Only
The content within this post is for educational purposes only and does not represent legal, tax or investment advice. Customers should consult a legal or tax professional regarding their own situation. This presentation is not an offer to purchase, sell, replace, or exchange any financial product. Insurance products and any related guarantees, features and/or benefits are backed by the claims paying ability of an insurance company. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.