Market volatility returned in the first half of 2025.
A sharp correction in April—triggered by the market's reaction to the "Liberation Day" tariffs—sent global markets tumbling, with the S&P 500 plunging over 10% before rebounding to hit record highs by the end of June and into early July.
Geopolitical shocks added further turbulence, sending futures down and oil higher.
Though markets have since recovered, the rapid swings can rattle investors with the potential to trigger emotional investment decision-making.
With market volatility in mind, there are steps to consider as you meet with clients this fall.
Loss Aversion Bias: The Man Behind the Curtain
Behavioral finance shows us that loss aversion inflicts around twice the psychological pain of equivalent gains, which can potentially lead to emotionally driven financial decisions.
Faced with sudden losses, veteran and novice investors alike can second-guess their long-term plans.
During market volatility, investor inquiries skyrocket, rooted not in new fundamentals but fear.
Unfortunately, this often precipitates a self-fulfilling prophecy: selling at market lows, abandoning strategy, and then missing rebounds.
Sharp Drops, Historical Patterns, and Panic Responses
History repeatedly shows that volatility spikes often follow political or financial surprises, yet recoveries subsequently follow.
This happens when the markets realize their initial reaction was an overreaction, and the markets try to compensate.
In April 2025, the tariff-induced drop occurred over just a few days; by late June, the S&P 500 and Nasdaq recovered and set new highs.
This mirrors past events, such as the European Debt Crisis, Brexit, and COVID-19, when markets rebounded quickly after a crash.
Investors often bail during peaks of uncertainty.
A Vanguard survey post-COVID showed pessimistic investors were more likely to retreat, while optimistic ones stayed the course.
The question is, how do we instill optimism in turbulent times? Industry stats highlight vulnerability for financial professionals: up to 20% of clients leave within a year, and 25% within two years.
While not all abandonment happens in turbulent markets, anxiety-driven decisions peak when clients face steep losses or fear of loss becomes a concern.
Systematic Investing: A Proven Antidote to Panic
Systematic investing can counter emotion—driven decisions through dollar-cost averaging, rebalancing, and structured contributions, such as contributing early, often, and over a long period.
In 2020, Morgan Stanley found that of nearly 120,000 investors with financial plans, 93% stayed "on track" at the market peak and more than 75% stayed invested through the downturn even as markets fell 34%.
The lesson: disciplined, written-down plans can help shield investors from fear, potentially producing better long-term outcomes than attempting market timing.
Guardrails: Annuities, Diversification, and Client Stay Power
For many clients, especially retirees or risk-averse investors, systematic guardrails can potentially reduce abandonment risk:
Fixed index annuities (FIAs) provide downside protection with potential gains tied to an index, making them a potentially attractive option for anxious clients facing volatility.
Registered index-linked annuities (RILAs) allow greater market participation in exchange for clients getting less downside cushioning.
These vehicles can offer an emotional buffer: Clients retain market upside exposure while knowing losses are limited, softening behavioral triggers that can lead to abandoning their financial strategy.
Diversified investing—across equities, bonds, alternatives, and geography—dampens volatility.
Downtimes in one sector can be offset elsewhere, stabilizing the client experience.
Anchor Fear with Facts and Figures
Arming clients with historical evidence can reinforce potential emotional resilience:
By June 2025, after its April drop, the S&P 500 not only recaptured lost ground but also hit record highs.
An Investopedia survey found that only 24% of individual investors reduced their investments during the first half of 2025; over half remained committed entirely.
Some analysts argue that we may continue to see volatility through the end of the year.
It is possible, but even the most talented economist and portfolio manager can't predict the future.
However, we do know that we will see market volatility again in the future.
In addition, fear will always be an emotion we must address.
Abandonment risk is real, and as we move forward, we must help our clients navigate this emotion when the market becomes volatile again.
The historical narratives empower financial professionals to show clients that staying the course can potentially enhance long-term returns.
The Retention Edge: Why Behavioral Coaching Matters
Clients abandon their financial professionals for two key reasons: performance and emotional insecurity.
Morningstar notes that investors become "insecure, especially at times of volatility." In such phases, they need reassurance and a sense of control.
By proactively having clients put together a written financial plan, investment policy statement, and educating clients on market cycles, behavioral biases, and guardrail strategies (like FIAs and RILAs), you can consistently:
♦ Remind clients why they chose their current allocation.
♦ Demonstrate how guardrails can cushion downside risk.
♦ Provide historical context for volatility—and show how markets tend to historically rebound.
This converts market turbulence from a retention liability into an opportunity to deepen the relationship.
Anchor Investment Through Policy, Process and Systems
In today's uncertain environment, you must anchor client strategies on three pillars:
1. Investment policy statement (IPS): This document defines goals, risk tolerance, asset allocation, and rebalancing rules. It is a client's "north star" in emotionally charged markets.
2. Formal risk assessment: This quantifies client comfort with loss and clarifies when structured products (like FIAs and RILAs) or diversification may be appropriate.
3. Systematic investing strategy: Built on regular contributions, rebalancing, and financial planning.
Reinforces discipline, helps resist emotional selling, and enhances goal attainment.
When anchored in a robust IPS, informed risk assessment, systematic investing, and behavioral guardrails, advisors can help clients stay the course, strengthen long-term relationships, reduce abandonment, and transform market volatility from a threat into a tool for deeper engagement.
Tyler De Haan is director of advanced sales at Sammons Institutional Group.
Credit: Robert Ranson/Shutterstock
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