By David Koch, CFP®, AIF®, CFA, Director of Portfolio Management/Senior Wealth Advisor
What Your Advisor Should Be Doing During Market Volatility
Market volatility can be a true test of an investment advisor’s character and quality. When markets become turbulent, some advisors may avoid client contact, while others might give in to clients’ fears and sell off investments prematurely.
So, why do you work with an investment advisor? For many, it’s to get professional guidance during challenging market conditions.
Here’s what your advisor should be doing in volatile markets:
- Be available to provide emotional support.
- Filtering information to help ensure it’s useful and relevant.
- Helping you stay focused on your long-term investment goals.
If your advisor is doing these things, hopefully it can help you feel less anxious, stay committed to your plan, and be more likely to work towards your financial goals.
Providing Context for Market Volatility
A good advisor helps clients understand what’s happening in the market. During periods of high volatility, the financial news can be overwhelming. Your advisor should filter this information and provide clear, relevant insights. This helps you stay informed without getting overwhelmed.
Revisiting Long-Term Financial Goals
Everyone seems to be a long-term investor, as long as markets are going up. Effective communication reinforces your commitment to long-term goals. Unless your financial situation has fundamentally changed, it’s usually best to avoid making impulsive decisions based on short-term market movements. Selling off investments during downturns can lead to missing out on subsequent recoveries, which can harm long-term performance.
At Halbert Hargrove, we regularly review our clients’ financial goals and investment strategies to help maintain their alignment with long-term objectives. We emphasize the importance of maintaining market exposure and staying the course.
Reaffirming Investment Discipline
Disciplined investing is crucial. Staying invested with a well-thought-out strategy has historically paid off over the long term. Poor market performance is often temporary, and your advisor should help you maintain confidence in your investment discipline, even during volatile periods.
Your advisor should be a steadying influence, helping you navigate market turbulence and stay focused on your long-term financial goals.
Having a Process
You likely know the adage, “It’s not timing the market, it is time in the market,” but there are trading strategies that are sometimes superior to a simple buy-and-hold. We all know selling at the bottom is bad, but discipline means having systems in place and sticking to them.
Short-term drawdowns in the market may trigger our moving daily average trade (MDA), which goes to cash early in a drawdown. If markets continue to sell off, this should trigger tax loss harvesting in taxable accounts. Further market declines will eventually signal a rebalance, selling less volatile assets and buying stocks; and it should be worth noting that this is often the hardest process to stick to.
COVID is a recent example; our systems were signaling to rebalance in the middle of March 2020 after the equity market had sold off more than 30% in just over one month. This was either going to be the end of the human race, or the best equity buying opportunity since 2009. Being available to our clients, filtering the important information from the noise, and keeping our clients focused on their long-term goals allowed us to rebalance into a quicker recovery than a buy-and-hold strategy would have, and participate in the subsequent 18-month rally.
The Power of Proactive Communication in Wealth Management
Having a process, and the discipline to stick to it isn’t rocket surgery, but it can be terrifying doing it yourself.
At Halbert Hargrove, we prioritize understanding our clients’ perspectives. We reach out regularly to schedule meetings and address any concerns or fears about market fluctuations. Proactive communication is key; if you haven’t heard from your advisor in you-can’t-remember-when, or are interested in what it’s like to work with us, reach out today for a complimentary consultation.
Disclaimer:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com.(opens in a new tab) This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
