When War Events Sway Your Clients Investment Strategy
Now that the United States is at war, many financial advisors find themselves having to respond to clients who are itching to get back into the suddenly skyrocketing stock market. What kind of advice are they giving their clients?
These types of gains always attract attention from individual investors, says James Jacobs, a financial planner with Jacobs Financial Group, Chesterfield, Va.
When the market is on the rise many individual investors start thinking about shifting their assets back into stocks, whether theyre in mutual funds, variable annuities or individual investments. “I know there are people out there probably saying, Its time to get back in,” says Charles Petrizzo, national sales manager, Wachovia Insurance-Annuities, Charlotte, N.C.
However, just as quickly as the markets rose, a reaction set in after a weekend of casualties, Americans taken as prisoners and doubts about the speedy regime change in Iraq. The second week of the war saw the market off precipitously with the Dow dropping over 200 points in the first hour of trading on March 24, and closing down 307 points for the day.
This raises a timely question: Should investors be making investment decisions based on current events in the Middle East?
David Bryant, a registered representative with Farmers Financial Solutions, Tulsa, Okla., doesnt think so. He says investors trying to time the market based on the progress of the war do so at their own peril. “I am staying away from what I feel is an alarmist approach to a single event in time,” he says.
Bryant feels these daily events with the war will not have much impact on his clients long-term planning 15 years down the road.
Yet, in an interactive poll taken in last months Registered E-Report, an electronic newsletter published by National Underwriter, more than 80% of registered representatives who responded felt it was suitable to discuss the war in Iraq and its impact on clients investments. Only about 7% of registered reps participating felt it was not a suitable topic for discussion.
“I wouldnt be speaking [to clients] based on the progress of the war, I would be speaking based on what the market has been over the last three years,” says Jacobs.
Bryant says hes had a number of clients call in the last week and all of them were trying to make a few strategic moves to capitalize on the volatility caused by the war. “I had one client call who said Ive heard the biggest money is made in the first 21 days of a war,” Bryant says.