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How to talk to your clients about Brexit

By Carley Meiners

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The markets may be recovering from their Brexit losses, but many clients are still worried about what will come as the market continues on its volatile path. It’s uncertain if the United Kingdom’s future will affect the global markets, but advisors must be prepared to discuss the situation with their clients. 

Over the past week, the average market return was -0.10. Many billionaires across the world lost millions of dollars within 24 hours of the Brexit vote. That’s enough to scare clients into thinking their portfolios are not safe. In fact, according to Openfolio 75 percent of investors lost money in June. Below is more statistics from the investment portfolio site:

Brexit impact chart 1
Brexit chart 2

As July begins, and we’re all looking to gain back the losses from the first month of the summer, here’s what four financial professionals had to say about how to talk to clients and what exactly you should be saying.

Britain

What clients want to know 

Best investment right now 

Time to take your family for a trip over the pond! 1985 was the last low of the pound when it was about $1.30 to 1 pound and Friday, June 24, it closed about $1.36 USD to 1 pound. This means all lodging, entertainment, etc. are going to be a lot cheaper for your family.

What does this mean for my 401(k)?

1. It depends what you own. Expect short-term volatility, but realize you should only be in stocks if you are in it for the long run.

2. This will be a great time to shift assets to buy what’s on sale in your 401(k).

3. Consider paring down your position in Europe and international and put more money in U.S. stocks, natural resources and U.S. Treasury Bonds over the next year.

Where should I invest money now? 

1. Quality dividend-paying stocks: Especially VICE stocks that include alcohol, gaming and tobacco as they tend to do better during turmoil. People can’t help themselves to get back to human nature and their vices.

2. Real estate investment trusts and gold

How can I protect myself in case of a meltdown 

The biggest question to ask yourself is do I have protection on my money. Whether you run stop losses in your IRAs or brokerage accounts or seek out a high-quality annuity company that has products to help you minimize risk and produce retirement income guarantees, having protection will matter.

-Ted Jenkin, co-CEO, oXYGen Financial

Truth

Just tell the truth

“There is no need to fan the flames of fear. … Just tell the truth. That’s scary enough, especially for clients that can see their target retirement date on the horizon. Great Britain’s exit from the European Union was a reaction to globalization, immigration and the fear of terrorism. Many Brits feel they’ve been getting the short end of the stick from the EU for years. They gave up control over their money and their borders, and now, they want their country back. 

In my opinion, Brexit alone is not much of a concern. Our relationship with Britain is more cultural and emotional than it is financial. The bigger question is what other surprises are looming out there? The experts didn’t see this coming. What else don’t they see coming? Additional countries pulling out of the EU? A continued wave of anti-globalization sentiment beyond the UK? 

Markets don’t like surprises. The volatility isn’t likely to end any time soon. Clients and prospects with the stomach for it can choose to ride out the storm, but those that don’t will be looking for somewhere, and someone, to turn to for predictability and guarantees … if they haven’t already. That’s where we come in.” 

-Paul Mallett, senior VP, COO, Postema Marketing Group, LLC.

Ethics

Focus on ethics

“You can tell a lot about the character of an advisor by how he or she acts in times of financial crisis.

  • An unethical advisor looks at market turmoil and sees opportunities to enrich himself. An ethical advisor sees an opportunity to protect his clients. 

  • An unethical advisor is willing to make abrupt portfolio changes as long as there’s money to be made. An ethical advisor resists impulsive changes because there’s more money to be made long term. 

  • An unethical advisor stokes fear. An ethical advisor urges calm by highlighting the effective planning done in the past. 

  • An unethical advisor pushes transactions without fully understanding a client’s risk profile. An ethical advisor talks to his clients about risk long before market meltdowns occur.

In short, financial advisors do their clients a disservice by failing to provide steady reassurance during Brexit-like events. By encouraging them to make changes in times of panic, they increase the likelihood of further losses. They also increase the odds their clients will regret their decision and blame them for it. If you want to stand for ethics in times of market chaos, be calm, judicious and wise. Your business —and E&O insurance carrier — will thank you for it!” 

-Steve McCarty, chairman & co-founder, National Ethics Association

Same

Things will stay the same

“In case you haven’t heard of Brexit, it’s a cute Hollywood’esque word mashup of Britain and Exit. And in case you forgot who Britain is, they were once the rulers of The New World, so if this Brexit is anything like the last one (think 240 years ago) then it’s going to be great for the U.S. 

Ok seriously though, thanks to Brexit our office staff has been completely overwhelmed. I’ve had them tally up all of the incoming emails, phone calls, telegrams and carrier pigeon notes from our clients regarding Brexit, and we have received, wait for it … zero inquiries. The pessimistic people reading are thinking, easy to do when you don’t have any clients. Ease up there bub! We have a couple. 

Quite frankly I’m not worried about it. Things change. People change. Borders change (thank you Mr. Putin). Yet, things stay the same. Odd. In the end, with some planning, your clients should be fine, even if they’re about to retire, and Brexit turns from cute and cuddly to a recessionary catalyst. 

In the end, ultimately, you can only use a dollar for one of two things: To be spent or given. A dollar saved or invested is tomorrow’s dollar spent or given, don’t argue with me on this. Spend it or give it. That’s it. And we believe there are three fundamental areas to allocate dollars (always in this particular order):

1. Short-term income 

2. Long-term income 

3. Growth

A plan which first satisfies short-term income needs (in case someone unexpectedly loses a job), and then fulfills long-term income needs, will therefore only subject growth dollars (one’s not needed for income) susceptible to blips, hiccups and/or a downturn. Since the growth dollars aren’t used to fund income, at least not in the near future, the losses incurred still aren’t heralded. The status quo is unchanged and THUS the elimination of the anxiety caused by the pandering to unknown consequences caused by those crazy Brits exiting the building. At least this time, the place they left was upset over their departure. 

If you believe what I believe, that every dollar will eventually be used to spend or used to give, and your income dollars are not dependent, or at most minimally dependent, on the performance of the stock market, THEN there’s nothing to worry about even if the historical significance of Brexit meets that of July 4th, 1776. 

-Michael Markey, co-founder and owner, Legacy Financial Network

See also:

Pensions and Brexit. Another win for the baby boomers: Gadfly

U.K. insurers reel as Brexit threatens $2.6 trillion of assets

U.K. backs Brexit as Cameron resigns after historic rupture

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