The deteriorating economic climate is being registered in a gyrating stock market as well as in the uptick in concerned calls that financial advisors say they are fielding.
“Clients are very, very concerned. It is a matter of holding the fort and recommending that they not make sudden changes,” says Karen Altfest, a certified financial planner with L.J. Altfest & Co., New York.
Some clients have called the firm and say ‘at 10 o’clock, the market was at such and such,’ says Altfest. Other clients become “fixated” on market movement when they should “focus on the real ball: their own retirement,” she continues.
Altfest says she wishes she had “a salve” to make clients feel better, but in lieu of that she says her firm has been sending out 2 letters a week for the past 3-4 weeks, and extending weekend hours and morning hours before work so clients can drop in if needed.
What also helps, she says, is for them to not only have a long-term retirement goal but also shorter goals. For instance, a planner might call a client after the presidential election or say ‘let’s talk after the New Year,” Altfest suggests.
Clients are now susceptible to both fear and a wide assortment of commentary and opinion, she says, and that is why planners need to make sure they reach out to their clients. For instance, she says, one client wanted to follow the advice of a commentator whose advice Altfest considers “uneven.”
Altfest also recalls a “savvy” client who surprised her by his desire to sell and get out of the market.
In certain cases, she says it makes sense for a client to be out of the market, such as 3 female clients who are in their 90s or another client with uncertain job prospects who instructed Altfest to put 2 years’ worth of living expenses in money markets to ease her mind.
One solution may be to move a piece of a client’s equity holdings into cash holdings, but the client should also be reminded that missing the market bounce back up will be a sad thing, according to Altfest.
Ron Palastro of R.S. Palastro Financial Planning Services, Brooklyn, N.Y., says “some [clients] were very concerned. Some were out right fearful. But fortunately, very few are panicked.”
One major reason, he says, is that he is “very proactive” in reaching out to clients. “Any time the market is looking really ugly,” he adds, “we send out ‘hand holding letters.’”
Palastro says he focuses on life planning and where clients want to be in their lives in 5-10 years. He says he has a strong opinion about the strength and resiliency of America and the U.S. economy and that, in fact, the current markets are a tremendous buying opportunity.
If a client comes to him and wants to sell out of fear, he says he would try and reason with that individual.
For instance, Palastro says he had a new client who had $1 million in his pension that he insisted on moving to a money market, ignoring advice to look at retirement as a long-term initiative.
Palastro says by removing himself from the market, this client has missed opportunities including the 962 point gain of the Dow Jones Industrial Average on Oct. 13.
“If you organize your life around goals and priorities, everything else will fall into place. But, if you jump off of a moving train, you’re going to get hurt,” he cautions.
Not all clients tell their planners what they are doing, however.
Kathleen Piaggesi, a certified financial planner and owner of K/A/P Planning Advisory in Scarsdale, N.Y., says regular contact with clients prior to the fall market turmoil paid off when only one concerned client called regarding action in light of the stock downturn.