10 Unexpected Reasons Volatility Drives Clients Nuts

6. The commodities analogy. It’s been said before you invest in commodities — where you can lose more than your investment — you should put cash in a bowl, set it on fire and force yourself to stand with your hands behind your back. Clients feel watching stock market declines is similar. “I didn’t do anything wrong. Why is this happening to me?”

Thoughts: The stock market isn’t closing forever at 4 p.m. today. It’s an ongoing process that often works in cycles. Burning money is forever. You can’t put it back together. As long as you stay invested, you are still in the game.

7. Lack of responsibility. People on TV play up market volatility. (It soars, it plunges.) They don’t take responsibility for their remarks after the fact. There’s no “How about that? The market bounced back! Guess we were wrong. Sorry to have scared you.”

Thoughts: Taking advice from people on TV is similar to someone not knowing you personally, telling you what to do. The TV programs make a concerted effort to explain “This is not advice.” Advice comes from an advisor who knows you.

8. In a perfect world, none of this should be happening. The economy is doing well. Oil prices are low. (People who drive or buy heating oil like low prices.) Unemployment is down. Wages are rising. The Fed is on the ball, keeping interest rates in check. So why is the market going down?

Thoughts: It’s a mistake to assume fundamentals don’t matter anymore. If you can take the long view, let the market get its troubles out of its system.

9. You’re the expert. Why didn’t you see this coming? In life, we want a villain to blame. You’ve heard the accident lawyer ads on TV. Somehow, we are not at fault. There are market declines. Difficult to pin blame on any one person. Then there’s the advice they receive. It comes from you, their advisor. Why didn’t you see this coming? It was all so clear (in hindsight.) Among the many commentators on TV, they hear one who says he predicted a decline. By their logic, you should have known this, too.

Thoughts: You’ve probably been beating the asset allocation drum for months. Without saying “I told you so,” this could be a teachable moment for why we should take a good look at asset allocation. If your client has long-term goals, it’s still early in the game.

10. Remind me again, what is your job? Clients often imagine an advisor is similar to a police officer who sees a truck hurdling towards a little child crossing the street. He leaps, he grabs the child, and he deposits her on the sidewalk. The child is unharmed. Some clients assume an advisor’s job is to time the market (the truck traffic) and lift the children (clients) out of the road.

Thoughts: Timing the market doesn’t work, because it can turn on a dime and head upward, too. The advisor’s job is to understand a client’s risk tolerance and long-term goals and to keep them focused. In this case, you are like the police officer who talks a jumper off the ledge and back into the building.

It hurts to lose money. Since a security is only worth what you can sell it for now, paper profits and losses are real profits and losses. As their advisor, you can help identify what’s getting them scared and try to calm them. Although clients don’t think about actually paying for it, hand holding does have a value. However, at the end of the day, it’s their money. They can do as they choose.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” can be found on Amazon.