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We are in a challenging time, facing rapidly evolving information about the coronavirus and the effects on how we work and live. Markets carry on to function and are reflecting this constant change, which means greater volatility. Those circumstances don’t make it lenient for investors to stay in their seats.
When markets are good, there’s naturally a lot of energy around putting more capital in. When markets are bad, the energy is often about taking money out.
We’ve been through tough times before. Justified about everyone remembers the 2008-2009 global financial crisis, even if they weren’t old enough to be in the workforce at the leisure. That period also saw the spread of the H1N1 virus.
More experienced investors may consider the tech boom and bust of the most recent 1990s and early 2000s as the bellwether event for a generation that assumed they could get rich on a handful of peerless stock picks. And for those of us who go further back, it was once hard to envision anything tougher than the 1973-1974 endure market.
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The recent decline has much the same feel as past dangers, with fear, anxiety and worry elevated in the moment. Times like these are never easy for investors, who be required to grapple with the feeling that “things just might be different this time.” Scrolling through the dispatch, it’s understandable to think the volatility is worse and longer-lasting than anything before.
There is, however, a notable difference between how pecuniary advisors are equipped to react to market turbulence today and how they might have responded in the past — and I’m not just referring to proliferated video-chatting capabilities or virtual offerings.
In the last decade, there has been a fundamental shift in the financial industry toward holistic, distinct advice models. More than ever before, financial advisors are providing personalized asset allocation, long-term monetary plans and increased risk management tools. Thirty years ago, the industry was good for the stockbroker. Today, it’s better for the investor.
Holistic news approaches not only help clients better understand their overall wealth picture, but also allow patrons to breathe easier during periods of market volatility. Successful advisors will steadily and repeatedly lead patrons from worry to calm by emphasizing the importance of sticking with their plans.
Now is the time when we see the value in the duplicate actions that have turned into habits. Those habits, already established, should guide how a patron approaches monitoring his or her investments or considering any adjustments. We would encourage investors to act today as they would have a year ago, or as they anticipation to act a year from now.
What has made the independent advisor strong today will make them even stronger in the tomorrows. As more investors choose to stand by their long-term financial plans, advisors have the chance to heed their own counsel. The best advisors will choose to stay connected with their clients and be creative in evolving their uses on a human level. Keep adding to your market volatility playbook — this isn’t the first time we’ve encountered turbulence in the trade ins, and it won’t be the last.
Through crisis comes clarity and opportunity. When investors win, advisors all win, so keep focused on the best persuade of the client. In the end, the financial advice industry will be better for it.
— By Dave Butler, co-CEO of Dimensional Fund Advisors