After the UK voted to leave the EU, there was a mass panic among the public and media over how the country would change and the markets fell accordingly.
However, despite all of this we’ve had no panic from our clients in the weeks following Brexit worried about the money, demanding switches being made to their investments.
This was not unexpected as I’ve put in processes to make sure my clients trust me so they don’t panic over short term market movements. I think that’s one of the most important things I do as a financial planner and the area I can help clients the most.
Nowadays we have 24/7 news channels, the internet and apps that tell people if the market is going up or down instantly, so it can be very hard for clients to tune out. But the best value an adviser can add is to help clients tune out of things that are not in their control.
It’s an ongoing education process, I’m very clear from day one when I meet prospective clients that my offering is not about fund picking and it’s not about market timing. There are scores of advisers that will offer that service, and if that appeals to people, I tell them I’m not for them.
I expand my point to explain that an investor’s own enemy is themselves and also explain that what I will do for clients is manage their reaction to investments; I can’t manage the markets, but I can manage the reaction and the disclaimer that investments can fall as well as rise is very true and what I do know is if you invest money, at some time the value will fall, and often quite sharply and it will be quite unpleasant, however, when those moments come we’ve got to sit tight and get through them because eventually stocks do recover and you do get rewarded for holding that risky asset in the form of a premium over if you had the money in cash.
That’s something I say at the outset. I’m a passive person in terms of the funds I select. It’s very hard to beat the market, so I don’t do that. If you get the market return you’re going to be doing far better than most people, and if you stay in the market through all different cycles you’re going to be doing much better than people that invest themselves and chop and change constantly.
During annual meetings we show clients the cashflow forecast which is a bit part of what we do, and I can show them that even if their ISAs, pensions, unit trusts have fallen, actually the long term prognosis for their financial health is fine. If you can show clients they’re going to be okay in 10, 15 or 20 years’ time, the short term falls don’t matter.
The only counter-argument to that is what if people need the money. If the people need the money in the short-term they should not have been invested in the stock market regardless. It’s about time in the market, not timing the market.
We will switch clients’ investments when they come through a certain life stage, typically retirement. That’s when we take risk off the table, because if you’re retiring in 2 or 3 years time and the markets plummet, you don’t have time for the funds to recover.
Since March 2009 we’ve been in a generally fantastic bull market, and clients have seen their portfolios picked up year on year. But despite clients enjoying such a good run, they’ve not reacted wildly to the Brexit news because I’ve drummed it into them that we must focus on their long-term financial plan; they’ve got to stick to the programme.
A few days after the Brexit vote result I sent out an email to clients saying it may all seem catastrophic but let’s stick with the programme and let clients know I’m here for them if they need it but reminded them that we’re all about financial planning, and that is about aligning life goals with money to ensure clients always have enough of the latter to satisfy the former. Investment plans that fuel lifestyle costs for decades should never be held hostage to transitory blips.
I received two responses to that email from clients both saying thank you and the email was reassuring, and that was it. And if you focus on an ongoing education with your clients, that’s how it should be.
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