How can psychology can help financial advisers manage the effect of market turbulence on client relationships?
Author: Paul Hogg, 8AM Global
This is the second of a mini-series following my discussions with Peter Thomson, clinical psychologist, this week focusing on how psychology can help financial advisers manage volatility with their clients.
In times of increased volatility, it’s natural for clients to feel anxious. Whether it’s driven by global geopolitical tensions or domestic uncertainty many clients look to their adviser not just for financial guidance, but emotional reassurance.
Peter emphasises that simply saying, “It will all be alright,” is rarely effective. While this may sound calming, anxious clients require more than just reassurances; they need clarity and perspective. They want to understand the rationale behind a financial strategy, clearly laid out and thoughtfully explained. Demonstrating the principles of long-term investing and explaining why it is generally advisable to stay the course during market fluctuations can provide that clarity.
Understanding and managing a client’s emotions is crucial to preventing impulsive decisions, such as liquidating portfolios during downturns. Advisers should create space for clients to voice their concerns by asking open questions like: “What is it that worries you or keeps you up at night?” By showing how the strategy in place addresses those specific concerns, advisers build trust and reinforce the strength of the adviser-client relationship. Acknowledging their fears and providing practical context can be more reassuring than market prediction!
This idea aligns with a point made in our recent 8AM Insights webinar, Leveraging Consumer Understanding for Better Outcomes, where Karl Dines of Open Door Policy stated that it’s worth advisers going back to basics and asking clients “do you understand what we’re doing and how we are doing it?”
Regularly reviewing “the plan” with clients, and seeking to dedicate at least 30 minutes per review meeting, can go a long way toward strengthening understanding and confidence.
It’s important to foster a dialogue rather than just deliver a presentation. Advisers should ask open-ended questions like, “What do you think you have invested in?” “What risks do you believe are involved?” and “What do you think our charges are?” These questions help reveal gaps in understanding, allowing advisers to correct any misconceptions before they become points of concern.
As we all know, there’s no one-size-fits-all investment approach. Some clients may prefer ‘set and forget’ solutions with longer-term targets and a focus on efficient exposure, while others are more drawn to adaptive portfolios that proffer active management and regular review. What’s consistent, however, is a desire for reassurance – confirmation that someone is monitoring their portfolio and proactively making pragmatic decisions when needed (over the long or short term).
Peter and I agree that the key lies in proactive engagement – before, during, and after periods of turbulence. Setting clear expectations early and maintaining regular, meaningful touchpoints ensures clients feel heard, understood, and supported. At 8AM, we enable this by providing advisers with concise reporting, insightful articles, and timely market perspectives to share with their clients.
In conclusion, today’s digital world encourages fast thinking and faster actions – often at the expense of reflection. Clients can be just a few clicks away from impulsive decisions that could undo years of careful planning. As Peter rightly says, “thinking gets attacked” by catastrophising and panic. That’s why the adviser’s role isn’t just financial – it’s psychological. Therefore, the adviser’s role extends beyond financial guidance; it encompasses psychological support. By combining expert planning with empathy, education, and consistent communication, advisers can help clients stay on track, even when the markets are unstable.
Paul Hogg, Head of Distribution
This content is intended for financial professionals only. These are the author’s views at the time of writing and may be subject to change. This content is not intended to provide the basis for any investment advice or recommendation. Any forecasts, figures, opinions, tools, strategies, data, or investment techniques are included for information purposes only.
The information presented is considered to be accurate at the time of production and has been obtained from or based upon sources believed by the author to be reliable and accurate, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Please visit our Regulatory Information and Terms of Use pages for more information.
Production