How a Financial Adviser can help during Market Turbulence
Over the past few months, there has been a lot of discussion in the media about whether or not we are seeing warnings signs of a recession. Should one occur, what does that mean for your financial planning? And how can a Financial Adviser help?
Recessions can interfere with financial planning efforts, if for no other reason than the threat of a recession can cause you to question the steps you’ve taken with your money and investments.
While economic downturns naturally are a cause for concern, working with a financial adviser can help you to prepare for a recession and 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.
A financial adviser helps keep you focused on your long-term financial plan
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.
“We always go back to the asset allocation because that is the prime determinant of how well you do,” said Leo Marzen, co-founder of Bridgewater Advisers, a Harness Wealth Adviser. “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.”
An adviser can help you capture short-term opportunities
While a fear-driven reaction to a recession is to be avoided, recessions do present some opportunities it can make sense to take advantage of. 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.
“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,” says Tripp Neville, CEO at New World Advisors, a Harness Wealth Adviser.
Professionals can provide the reassurance necessary to help you stay the course
Many people are quick to make changes to their financial plan 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 help you to see the recession in context so 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.
“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 our responsibility as an adviser to help clients stick to a plan and not have an emotional reaction,” says Larissa Mehlfelder, a Director and Principal at Massey Quick Simon, a Financial Adviser on the Harness Wealth platform.
No one can accurately predict when a recession will occur. 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 a recession shouldn’t affect your ability to achieve your money goals over time.
We can help you find a financial adviser to guide you during turbulent times. You can find an adviser here.