Positioning Events Within The Overall Market Backdrop May Help Manage Client Anxiety About Issues Like The Fiscal Cliff

Thursday, December 13, 2012 21:35
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Positioning Events Within The Overall Market Backdrop May Help Manage Client Anxiety About Issues Like The Fiscal Cliff

Tags: behavioral finance | client education | investor behavior

With so much in the media about the fiscal cliff, your clients may be asking you questions about how they can prepare for it. They may be nervous and on the verge of making unwise investment decisions.

 
This is a normal behavioral tendency. One advisor has managed to avoid that behavioral tendency by normalizing the conversation around the issue.

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Fred Taylor is president and co-founder of NorthStar Investment Advisors based in Denver, CO.
 
Conversations with his clients about the fiscal cliff began way back in January. He points out that there’s also been talk all over the country about the issue, even as far back as the debt ceiling crisis of 2011.
 
He points out that volatility in the markets is light, indicating the markets have already discounted the fiscal cliff. If clients felt the market was on the verge of a 20% decline, they would be taking action.
 
He also notes that Congress would definitely be taking more definite action if the markets were in turmoil and on the verge of such a drop.
 
The real question to ask is if clients will need to change their investment strategies if the economy goes over the cliff.
 
So far, that answer has been no for Taylor’s clients. It doesn’t mean the market won’t react either way—whether a compromise is reached or we go over the fiscal cliff.
 
But keeping your clients calm and pointing out what’s really going on in a way that makes sense to them can help them prepare for whatever may happen and help them make more rational decisions when it does.

 

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