We Don’t Just Talk About the Market – Communicating with Clients During Volatile Times

April 5, 2023

A Q&A with Jennifer Valdes, CFP®, principal of Financial Designs Wealth

As a wealth advisor, your client communications skills are constantly put to the test given the unpredictable nature of the market. Just as one news cycle affecting the markets winds down, another whips up like a cyclone…Failed banks, Big Tech layoffs, Fed interest rate hikes and inflation, the housing market and recession…While you can’t control the headwinds, you can navigate your clients’ concerns, steering them away from a hopeless horizon.

Now, more than ever, is the time to not only reassure your clients, but also to stay out in front of them. The importance of thoughtful, frequent communication—even when you’re not discussing their investments—cannot be overstated.

In this series, Dynamic-affiliate advisors weigh in on how they’re communicating with clients during these uncertain times. In this Q&A, Jennifer Valdes, CFP®, principal of Financial Designs Wealth, Miami, offers her insights.

Key Takeaways from Jennifer:

  • Don’t allow clients to let their emotions affect their decision making; do explain the buying opportunities provided by volatility.
  • Stay in constant communication with clients.
  • Establish a monthly contribution plan.
  • Review financial plans and make the appropriate adjustments.
  • Make the complicated simple, i.e., educate clients by simplifying complex financial language.

Dynamic: What would you say is the most important “Do” and the most important “Don’t” when talking to clients about market volatility?

Jennifer Valdes: The most important don’t when talking to a nervous client is allowing them to let their emotions affect any decision making. We know this is easier said than done so we always emphasize and reiterate to our clients that in our view, the biggest mistake an investor can make is selling during a loss.

By attempting to time the markets, the two most important decisions that are nearly impossible to predict are: when to get in and when to get out. In contrast, the most important do is reversing their mindset by explaining the potential buying opportunities provided by volatility.

If you walk into a store and there is a 20% discount, would you wait for the sale to be over to buy the item at full price? It could go on clearance and drop to 30% the following week, but are you willing to take the risk of losing the discount to begin with? It will eventually go back to full price! The same can be applied to the market. Downturns can present buying opportunities.

D: What are some of the primary ways you’re alleviating uncertainty and fears among your clients during this time?

JV: Providing regular market updates and constantly communicating with our clients is crucial, not only when the market is in turmoil, but also on an ongoing basis. Aside from this, during this time, we are scheduling additional reviews to address any concerns. We continue to emphasize our focus on diversification and a long-term strategy.

Even amidst recessionary times, markets and individual companies can appreciate due to companies cutting costs and improving bottom line profits. The S&P 500 chart that shows the historical intra-year drawdowns in positive years is a document we refer to often when discussing concerns about short term volatility.

D: What types of strategies are you providing clients to better cope with or take advantage of market volatility?

JV: A big focus with market volatility is establishing a monthly contribution plan so clients can continue to dollar cost average into the markets at attractive valuations. We have also looked to accelerate implementation schedules for clients who wanted to invest in the markets overtime. In contrast, we have left a larger cash balance for those in the withdrawal phase to avoid liquidating at a discount. We are also looking at alternative investments for those clients that don’t need liquidity and meet net worth and suitability requirements.

D: Has financial planning taken on a greater role in your practice during this time of market volatility?

JV: Financial planning has always been a first priority at Financial Designs Wealth with or without market volatility. Our holistic approach ensures all pieces of one’s financial puzzle are always working together cohesively. However, where appropriate, we have made adjustments to their plan such as the dollar cost averaging mentioned above, super funding 529s and Roth conversions.

D: How does a bear or volatile market provide an opportunity for you and your firm to demonstrate your value to prospective clients?

JV: The power of rebalancing coupled with our tilts has provided alpha to client portfolios in the last year. During these times, we reiterate all the moving parts within our clients’ plans to ensure they understand each piece and its purpose. We know that the financial world can feel overwhelming, so we pride ourselves on educating clients by simplifying complex financial language to ensure they understand each part of their financial plan.

Jennifer Valdes, CFP® is a principal at Financial Designs Wealth. All investment advisory services are offered through Financial Designs Wealth Management, LLC (FD Wealth), an independently owned registered investment advisor. Click here for Valdes’ full bio. 

Read the Q&A with Brian Bucell, CFP®, managing partner of Crestview Capital Management

Read the Q&A with Shannon Larson, financial advisor at STF Wealth Management

 Photo: Priscilla Du Preez, Unsplash