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March 06, 2020 at 01:52 PM
Countries around the world are assessing the human impact of the current coronavirus outbreak, as total deaths have now eclipsed 3,000. The vast majority of infections and deaths have occurred in mainland China, but other nations, including our own, are responding to the potential for a wider outbreak with travel restrictions and quarantines of highly impacted areas.
Any major news event involving China will likely cause ripple effects around the world, due to the important role the country plays in the global economy. And now that coronavirus has hit home it’s become even more real to American investors.
(Related: Stocks Tumble, Bonds Surge on Virus Fears)
Given the ongoing uncertainties surrounding the duration and scope of the outbreak, financial advisors are being called on — literally, in many cases — to answer client questions that sometimes don’t have answers. Yet, advisors have a critical role to play in helping their clients make sound financial and investment decisions. Doing so requires delivering steady encouragement to clients to remain calm, not react to the headlines and stay focused on the long-term.
That is no small task for today’s advisors. Thanks to 24-hour financial news channels, the Internet and mobile devices, there is now a never-ending abundance of news and information with the potential to impact the markets and your clients’ behavior. While you might expect that this river of information would inform better investment decisions, research has shown that it’s often the opposite. During times of heightened uncertainty, emotions can take over and negatively affect our investment decisions. Many advisors may have experienced this in client conversations in the past week.
The best way to prepare for volatility, low interest rates that are challenging investors and the uncertainty we are experiencing now is through portfolio diversification and creating a financial plan that will meet your clients’ financial goals while accounting for the market’s inevitable ups and downs.
But I suspect many advisors find themselves working with people in the midst of this uncertainty who may not have done that preparation, or even if they have, are still tempted to react to the news of the day.
For those advisors, here are five simple facts to encourage clients to keep in mind as a potential antidote to reflexive shortsightedness.
John Carter is the president and chief operating officer of 