5 practical ways to help clients during market volatility
Markets can be unpredictable, but with these five tips, your client’s investing strategy doesn’t have to be.
Markets can be unpredictable, but with these five tips, your client’s investing strategy doesn’t have to be.
During volatile markets, clients look to their advisors for more than just financial expertise. They’re looking for reassurance and perspective. Below are five ways you can help your clients keep their financial plans on track, balancing the stresses of short-term volatility and long-term goals.
1. Assess your client’s goals
Volatility provides an ideal moment to review your client’s financial plan and confirm it still reflects their goals, risk tolerance, and time horizon.
Recent changes in your clients’ lives, paired with market changes, can put your clients at risk of not reaching their goals.
By conducting an assessment of each client’s goals, you can plan to make adjustments if needed to align assets with a client’s financial needs. For example, making sure they have enough lower-risk assets (cash or bonds) to cover shorter-term needs. You can use this opportunity to stress-test a client’s portfolio and remind them that their plan is built to weather periods like this.
Tools within Betterment Advisor Solutions allow you to update risk preferences, adjust allocations, and communicate clearly how changes may affect long-term projections.
2. Use auto deposits to maintain consistent investments
A simple and effective way to help clients stick to their plan is by encouraging automated deposits.
When markets decline, many investors are tempted to stop making contributions, which means they could lose out on potential market gains when the market rebounds. Setting up recurring auto deposits into investment accounts can help clients stay committed to their goals regardless of market swings.
Auto deposits also enable dollar-cost averaging, which spreads out purchase prices over time and helps manage downside risk. The key is consistency, and automation makes that easier to maintain.
Here’s an easy explainer on dollar-cost averaging for your clients.
3. Use Cash Reserve to build a buffer
Financial confidence during downturns often comes from knowing there’s money set aside for unexpected expenses.
Without a cash buffer, Without a cash buffer, clients might feel pressured (or forced) to sell investments at a loss to cover unexpected expenses. Clients also risk having to tap into 401(k)s and other retirement accounts, which can come with consequences.
Clients should aim to set aside 3–6 months’ (or more!) worth of expenses in a high-yield cash account and earn a competitive interest while maintaining ease of access to their funds.
Using a Cash Reserve account from Betterment not only enhances liquidity but also ensures their investment strategy stays intact during market volatility.
Here are tips for your clients on how to level-up their emergency fund.
4. Set up a gains allowance
Market volatility often fuels the urge to “take profits” or, potentially worse, miss the opportunity altogether.
Rather than managing volatility on the fly, an automated gains allowance allows you to maintain more granular control over capital gains while optimizing your client’s tax impact. Without a gains allowance, clients may struggle with the fact that they haven’t realized any profits, leading to one-off decisions.
With Betterment Advisor Solutions’ tax management tools, advisors can set an annual capital gains allowance for each taxpayer in a household.
With our automated tech, capital gains realized from all taxable events will contribute to the gains allowance, while all realized capital losses in taxable accounts will offset realized gains and free up room in the gains allowance. When the allowance is reached, trading will cease selling assets with unrealized capital gains but will continue selling assets at a loss. With Betterment, you can edit this allowance at any time for your clients.
5. Communicate proactively
In times of uncertainty, silence can create fear. Advisors should lean into proactive communication, offering perspective, context, and empathy.
Without communication, clients may lose trust in your ability to serve them and likely go elsewhere to have their questions answered.
By consistently checking in with clients, you can build deeper relationships. It’s also an opportunity to build more trust by using data and historical trends to reframe market dips as opportunities, like buying at a discount, rebalancing portfolios, or optimizing taxes.
Betterment’s platform offers advisors communication and planning tools to connect 1:1 with clients.
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