How a (Virtual) Financial Adviser Can Help During Market Turbulence
Sudden drops in market performance can be alarming. What does this mean for your financial planning? And how can a Financial Adviser help?
While economic downturns are a cause for concern, working with a financial adviser can help you plan ahead and strategically stay the course when it comes to achieving your objectives. In fact, there are many benefits to getting professional financial advice that could be especially important in times when economic growth is slowing. A recent study found advisers added value with:
- Better financial outcomes: Eight in 10 clients who received professional financial advice had an 80% or greater probability of achieving success in retirement planning goals.
- Increased portfolio value: Advisers can provide assistance with tax efficiency; rebalancing portfolios; and developing the right risk/return profile – all of which can lead to better performing investments.
- Better emotional outcomes: Clients who receive professional financial advice find that the emotional benefits provide significant value. This is especially true during a recession when economic uncertainty can cause money management to become more stressful.
COVID-19 (Coronavirus)-driven downturn in 2020: Get virtual advising
The steep decrease in February and March of 2020 following the spread of COVID-19 internationally had caused the worst weekly drop for US markets since the global financial crisis of 2008, and subsequently continued turbulence as the markets continue to react to changing circumstances. As you consider your personal financial situation and what key investment decisions you should make now and in the weeks to come, you should consult an experienced advisory firm, and given current public health concerns, do all meetings virtually (over the phone or on video).
- Tax Payment Deadline Extension: Planning for the Impact of COVID-19 in 2020
- Investment Strategies for the Impact of COVID-19
A financial adviser helps keep you focused on your long-term financial plan
From Leo Marzen, co-founder of Bridgewater Advisers, a Harness Wealth financial advisory firm:
“We always go back to the asset allocation because that is the prime determinant of how well you do. If you have worked with your financial adviser to invest in an appropriate mix of assets, the smartest course of action is to stick to the plan and wait for the recovery. The worst time to make changes is during periods of volatility, stress, or market hysteria.”
One of the key benefits of working with a financial adviser is that a professional can provide assistance creating a solid long-term financial plan designed to help you grow wealth over a long period of time. When you have a logical, informed plan in place, there’s no need to react in response to a recession because your financial plan is designed to help ensure financial success even as the economy naturally moves through both boom and bust cycles.
Advisers provide assistance in building an appropriately diversified portfolio and offer advice on changing portfolio allocations. Diversification reduces the risk of financial loss during a recession. And allocating assets in accordance with risk tolerance enables investors to be more comfortable staying the course even during times when the market performs poorly because they aren’t taking chances with their money they cannot afford to take.
Short-term buying or selling opportunities
From Tripp Neville, CEO at New World Advisors, a Harness Wealth financial advisory firm:
“During times of volatility, we tactically exploit market dislocations and rebalance portfolios appropriately. Rebalancing provides us with the opportunity to trim portfolio positions which have performed well and increase positions that we have conviction will deliver long-term value but have temporarily fallen out of favor for a non-fundamental reason.”
While an emotionally-driven reaction to market ups and downs should be avoided, some situations can present some opportunities you may be able to use to your advantage. A financial adviser can help you to identify those opportunities, including:
- The opportunity to buy when the market dips
- The opportunity to sell losing investments at appropriate times to harvest your losses and reduce your tax liability
Professionals can provide the reassurance necessary to help you stay the course
From Larissa Mehlfelder, a Director and Principal at Massey Quick Simon, a Harness Wealth financial advising firm:
“During volatile and recessionary times, the conversation often comes back to the longer-term goals for the client. We endeavor to structure their portfolio to “weather the storm.” It’s your responsibility as an adviser to help clients stick to a plan and not have an emotional reaction.”
Many people are quick to make changes to their financial plans in response to a recession instead of simply recognizing it as a natural part of the economic cycle. An abrupt response to recession could lead to poor decisions such as selling investments low and locking in losses.
Financial advisers can provide industry and historical context so that you don’t make decisions with a long-term negative impact based on heightened emotions or a fear of financial loss. Financial advisers can offer not just an outsiders perspective but a rational, informed assessment of your financial plan. Their expert, well-reasoned advice can help you to make the right choices for the long-haul rather than reacting in the moment.
No one can accurately predict when the market will go up or down, or by how much. While there are additional benefits to working with a financial adviser during periods of economic downturn, there’s no reason to wait for an economic disaster before you get professional advice. If you develop a sound financial plan with an adviser today, you’ll have the peace-of-mind of knowing that future market volatility shouldn’t affect your ability to achieve your goals over time.