Don’t Overreact. Stay Optimistic. Advice From Advisors Post-Election

Whether it’s been clients or media asking advisors the questions, the advice has been the same: ‘Focus on the long term’

A trader on the floor of NYMEX. (Photo: AP) A trader on the floor of NYMEX. (Photo: AP)

By late Wednesday afternoon, Paul Bennett, a certified financial planner and managing director of the United Capital office in Great Falls, Virginia, said his office had already fielded post-election questions in “two client meetings and two prospective client meetings.”

“At the end of the day, what I’m telling clients is ‘Don’t make knee-jerk reactions based solely on what happened last night.’ Because yeah it’s been a really polarizing divisive election. Probably the most in the last hundred years.”

Rather than panic, Bennett calls on clients to focus on the strength of the economy despite the uncertainty.

“If you set aside politics, which is not easy to do for most people, but if you do and you look at the economy it’s in a growth phase,” Bennett told ThinkAdvisor. “It’s been slower. Slowest recovery we’ve had coming out of a recession, but it is growing. And it’s encouraging across the fact that we have businesses hiring folks, employment is up. You have consumer spending, and confidence levels are not where they were but they’re certainly improving.”

However the number of concerned clients actually reaching out to their advisors immediately after the reaction may be on the slim side.

Chris White, a CFA and wealth management advisor based in Boston, said he’s been getting more calls from reporters and radio shows wanting his commentary.

“Since I’ve worked with many of these clients for decades, they understand my basic mantra, which is really focus on the long-term,” White told ThinkAdvisor. “Don’t let the short-term perturbations of the market get you upset. The companies that we invest in are good-quality companies with good managements that have been through rapid and slow evolutionary changes and they’ve exhibited an ability to navigate those treacherous waters well.”

Michael Kitces echoed a similar statement on Twitter on Tuesday.

“So far today, I've fielded more media inquiries about what to tell clients, than any advisor in our firm has fielded in ACTUAL client calls,” Kitces said.

White, who recently wrote the book, “Working with the Emotional Investor: Financial Psychology for Wealth Managers,” said that his best advice to clients is sometimes to turn off the radio and television.

I can hear when they call me and they’re upset and I can hear in the background one of the financial TV shows going,” he said. “I say, ‘OK let’s first turn that off and then we can have a conversation.’ All of that is designed to make people feel anxious.”

For clients that may be feeling anxious and uncertain, White has an optimistic long-term view.

“People I think are scared. I think they don’t know what to expect,” White said. “I just have a very strong faith in our economy that over time we’ll get this right, and we’ll do fine. But I tend to look in terms of 5-, 10-, 20-year increments. Not what’s happening the next week or two. I think that’s what the market gets carried away with.”

Bennett also stressed the need for clients to think long-term and rely on their advisor.

“A day, a week, a month does not a retirement plan make,” he said. “I think that’s critical to realize that. It does not mean to bury your head in the sand though. You need to have an advisor that has his or her finger on the pulse of what’s going on in order to conceptualize or contextualize that to you as a client for what may or may not need to be done.”

In an email to its members, Morningstar also reiterated the need to stay calm.

“Our basic message: Don't make any sudden or dramatic portfolio moves,” Jeremy Glaser, editor of Morningstar.com, wrote. “Morningstar analysts and editors have been examining the Trump victory from every angle: economic, investment, stock sector, and portfolio. Most importantly, we aren’t planning major revisions to our fair value estimates for stocks or our Analyst Ratings for funds.”

Morningstar also suggested that it’s a good time to review investments.

“[T]ake a step back and make sure you are comfortable with your asset allocation, given that we could see further volatility in the weeks and months ahead,” Glaser wrote. David Knoch, president of 1st Global, also thinks there is a “high likelihood of persistent volatility heading into the end of the year,” stressing the importance of the advisor-client relationship.

“[I]n the long-run time horizon of our clients, we’re going to be OK, that’s what makes America, our democracy and our people so special,” he said in a statement. “Financial advisors will need to coach their clients through this volatility and do what they can to keep their attention on the ‘big picture.’”

Knoch said that people often focus on investment performance and product choice.

“Uncertain times are when financial advisors provide the most value to their clients: keeping them from getting caught up in their emotional reactions which leads to hasty decision-making and losing sight of their long-term objectives,” he said.

In a note Wednesday morning to clients of Ritholtz Wealth Management – according to Josh Brown’s tweet – Barry Ritholtz proposed clients think beyond investments.

“My focus has been on the economic and market impact of political events, but I would be remiss if I didn’t mention the possible setbacks to social progress made over the past eight years,” Ritholtz writes. “Several of you expressed concern about this in emails last night; my suggestion is to think about how you might use your Trump tax cut windfall to follow your conscience in promoting the issues you care deeply about.”

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