Every morning, our partner firms join a call to discuss the markets, business operations, troubleshoot challenges, and hear the latest we are providing for them. As uncertainty strikes the U.S., both from a public health perspective and a market perspective, we’ve decided to share these calls to help you adapt to the constant changes advisors are facing. 

 

Jamie Hopkins, Director of Retirement Research, led today’s conversation:

  • Emotional State of Clients: Clients will probably be emotionally all over the board, and this can be a real time to shine for an empathetic, caring advisor. Remember that emotional reactions are to be expected and completely natural – listen and engage in conversation, do not write off a client’s emotions or try to quell them with cold data.
  • Risk Tolerance vs. Risk Capacity: Capacity for risk has more to do with the structural integrity of your portfolio and current asset levels. Tolerance is a matter of emotion. A billionaire might have no stomach for risk, an investor near bankruptcy might be completely comfortable with it. Right now, with an outside, non-financial shock affecting the markets, tolerances will probably be way down, even if capacity isn’t.
  • 2.5x More Pain than Pleasure: As human beings, we are more pained by loss than we are given joy by gains, usually 2.5 times more pain than the pleasure we find in a gain. You also need a high percentage of gain to offset a loss: for example, you need a 25% gain to offset a 20% loss. And the delta between the numbers gets bigger as you go on. The emotional gains and losses are similar: The emotional loss associated with market downturn takes more emotional gain to recover.
  • Short Term vs. Long Term: Answering client’s emotional concerns with the blanket dogma to “just stay the course” may not be helpful. Listen empathetically and offer constructive feedback – you can’t manage outcomes, but you can help them manage their expectations. Market volatility can show your value to clients beyond just simple returns because you can work with them holistically, tying in their life journey as well as their emotional state to their financial health. We don’t know how long the effects – and butterfly effects – of the virus will last.
  • Retirement Planning: There are opportunities to discuss reducing risk when goals have been met, focusing on sequence of returns risk, rising equity glide path and using bucketing as a storytelling technique in talking with clients.

Want to Join the Call?

Carson Partners are included in a daily web conference, where they hear from industry experts and catch up on the latest news. The more you’re informed, the better you can serve your clients. Partners are supported with research and market analysis, as well as marketing, back-office support, compliance, and the latest technology.

Interested in partnership? Schedule a complimentary consultation today.

AUTHOR

Jamie Hopkins

Managing Director, Carson Coaching
ESQ., MBA, CFP®, LLM, CLU®, ChFC®, RICP®
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