Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
The last few weeks have been plagued with unsettling news about the markets and the economy, including debt-ceiling concerns, a ratings downgrade and a 500+ point drop in the market. This uncertainty and volatility presents a challenge to advisors as to how and when they should communicate to clients about these events. Advisors must weigh what truly affects their clients versus what is just media hype.
I have encountered two perspectives from advisors about addressing breaking financial and economic news to clients:
-
Those who believe there is always a crisis-of-the-day (e.g. flash crash, Japanese earthquake, debt ceiling) and that addressing each of these events is not necessary. After all, this crisis will certainly pass and there will be a new crisis tomorrow. These advisors feel that their clients hire them to manage their money by making rational, long-term decisions and not reacting emotionally to the day’s events – so those crises should remain their burden, and not their clients’.
-
Those who believe it is important to address clients about newsworthy events so that they remain calm. Clients are hearing varying opinions about the markets and the economy from the media and the people around them, so it is important that they hear the thoughts of the person managing their money.
Of course there is a balance between remaining dead silent through historic economic downfalls and addressing every media-hyped event. In volatile times, as well as in more stable times, there will be occasions when it becomes necessary to communicate your interpretation of specific events. It is important that you are prepared when those times come.
Below are two things you can do now to be prepared when a crisis does occur.
