Advisors must acknowledge and address investor concerns about short-term risks, and then educate them on the importance of establishing goals and sticking to a long-term plan.
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That’s a mouthful. But it is a useful reminder.
Russell collected opinions of 448 financial advisors working in more than 200 national, regional, and independent firms.
Advisors and their clients are not on the same page. According to advisors surveyed by Russell, the concerns raised by most often by clients were government policy (58%), market volatility (51%) and global events (41%).
In contrast, advisors surveyed say are initiating conversations about portfolio performance (42%), keeping up with inflation (35%), estate planning (35%), and tax implications of investing (32%).
It’s not surprising so many advisors were talking about performance.
The survey was taken between April 20 and May 12. That was exactly when the market was peaking and right before it started plunging. Since peaking at the end of April, the S&P 500 has declined about 9%.
Point is, the list of short-term concerns of clients today is probably different than it was just a few weeks ago. The survey is already out of date.
But that does not diminish its valuable lesson.
Top of mind for investors are market volatility, domestic policy, and global political risk. They’re very much focused on the short term.
Advisors, meanwhile, are trying to get clients to address long-term inflation, estate planning, and tax efficiency.
For advisors and clients to be have crossed lined of communication is nothing new. But it is good to be reminded of this never-ending reality.
Moreover, the solution suggested by Russell is sound.
“For advisors and their clients to get on the same page,” said Kristin Gibson of Russell, “advisors first need to acknowledge and address investors’ concerns with short-term topics, and then educate them on the importance of establishing goals and sticking to a long-term plan.”
It’s basic but important: You have to listen to a client’s concerns and repeat back to the client in your own words what she says is worrying her. After you’ve allayed her fears about short-term issues, then the client is better able to hear what you have to say about estate planning, rebalancing and sticking with a plan to achieve long-term goals.