Financial advisers are used to having challenging conversations with their clients, but those conversations may be happening more frequently these days.
Superannuation assets dropped 0.5 per cent in the 12 months to June 2022, Australian Prudential Regulation Authority data shows. As such, it’s likely many pre-retirees and retirees are feeling a bit uneasy, especially when also dealing with inflation and interest rate increases.
Lighthouse Partners senior financial planner Lyle Filer said many of his clients are feeling it.
“I really have never had so many clients worry about the market before,” he said.
With that in mind, here are a few things that could be worth speaking to clients about in the current climate – especially if they’re prone to panic.
1. That’s why there’s a plan
Clients don’t enjoy hearing they’re losing money right before retirement. While those earlier in their working lives can be consoled with the knowledge that markets bounce back, pre-retirees obviously don’t have the same time horizon for that recovery.
Advice clients may need to be reminded that a financial plan takes into account the volatility of markets. It could be worth telling clients this very situation has been prepared for, from gains that have been locked in previously to asset allocation and other mechanisms that shelter their savings from sharp falls.
Better Financial Planning Australia senior adviser Michael Khouri said he likes to prompt clients to take a broader view.
“Yes, clients are concerned, but as advisers we have the duty to remind clients that, while we do not have a crystal ball, we need to step back, look at the big picture and focus on the strategy,” he said.
Mr Filer said the advice horizon includes good times and bad.
“When advising, we plan for the bad times and make sure our clients know that their super is a long-term asset; it isn’t about trying to time the market, but about time in the market,” he said.
2. The plan can be adapted
While we’re on the topic of the plan, clients may need to be reminded things can always be tweaked to better align to their goals and current hurdles.
As Russell Investments points out, clients may be consoled by hearing about what adjustments can be made or about opportunities declining markets can offer – such as lower-priced assets.
3. Advisers can add value in a crisis
We’ve all been through our share of crises in the past few years, with COVID-19, market turmoil and global political instability. Research indicates these may be the times when advisers show their mettle – something that could be worth sharing with clients.
A paper published in the Financial Planning Research Journal looked at the role advisers can play in a crisis – whether it be economic in nature or otherwise. It found clients turn to advisers in crises for a number of reasons, including concerns about not having enough time to make decisions, needing someone to bounce ideas off, and having the perception it may be too risky to traverse the situation alone.
Sometimes, the value an adviser can offer is about protection as much as growth, the paper suggested.
“Advisers need to be skilled in explaining to clients, and the community more broadly, why it is worth paying for and implementing their advice, even if the advice, particularly during a crisis, is to maintain the status quo,” the paper stated.
Whether clients are looking for a sounding board or a regulator for their behavioural biases, they may need gentle reminders of what you have and can do to help.
As Mr Khouri pointed out, “Clients really do value someone to chat to and a shoulder to lean on in these trying times.”