Two out of three advisors now say their conversations with clients are dominated by how volatile the markets are. This is an opportunity to do more than hold investors' hands.
Russell's latest market sentiment poll discovered that 44% of investors are raising concerns about performance and risk. Both of these statistics are elevated, and they indicate a sense of frustration with conventional "stay the course" wisdom.
It has been one of the worst decades in market history and this year has been especially grueling as macro events nobody seems able to control -- the euro, the U.S. budget -- keep pounding sentiment.
A lot of advisors are content to simply explain these headlines away as irrelevant to a long-term financial plan.
But given the angst levels, it's critical to explain why the headlines don't matter -- and to double-check with your clients to make sure they don't matter.
If your portfolio construction maximizes the odds that your clients will be able to survive any thinkable market environment, tell them that. Lay out the worst realistic scenario and explore the ramifications.
Will the European economy shrink by 10% or so? What will that mean for the S&P 500? For Treasury debt?
The answers might not be beautiful, but the better you can pin down currently amorphous dread, the better you and your clients can plan ahead.
And if the answers scare your clients, that's not the end of the world. It's time to adjust their risk tolerance. Once that's been done, they know exactly how bad the headlines have to be to keep them up at night.