Recent market turbulence has served to remind investors that nothing is certain in financial markets, and you must be prepared for risk. Financial planners and wealth managers try to coach their clients about the importance of long-term investing and ‘time in the market’, but has the message got through? What have clients been asking their financial advisers in recent weeks, and how have advisers been reassuring them?
At the start of April, sweeping US trade tariffs triggered a global equity sell-off, pushing the S&P 500 down 18.5% from its January peak and within a whisker of bear market territory. Markets staged a sharp rebound after President Trump backtracked with a 90-day pause on most new tariffs, and the S&P 500 surged nearly 10% to one of its biggest ever one-day gains. Meanwhile US treasury bond yields spiked as investors ditched all US assets.
Putting market moves into context
Wealth managers and financial advisers will be trying to put this month’s market swings into context for investors to prevent undue panic. Clients will understandably want to know if they can still retire when they want to, if they risk outliving their money when portfolios have suffered capital losses, and if they need to adjust their investment strategy.
“I’ve been receiving several calls from concerned clients about Trump’s actions, the press commentary and asking how this will affect them,” said Gianpaolo Mantini, partner at Saltus.
“Ultimately, most of these are seeking reassurance, looking for context and a sympathetic ear. This is not the first, nor will it be the last time that markets suffer a temporary correction – being able to discuss their concerns in a rationale manner is crucial.
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“Context is often key, if we look at all the events over the past 54 years – the average client lifetime – we can see numerous times when the geopolitical situation has looked worrisome; however, despite all these setbacks, the markets have risen inexorably.”
He has been reminding clients that it still makes sense to invest in “the great companies of the world”, but investors must take a step back from the noise and focus on what they can control. “In times like these, however unsettling, often the most positive action that you can take is to do nothing,” he added.
Alan Chan, director of IFS Wealth & Pensions, said his firm emailed clients on the day the tariffs were announced to remind them that market volatility is normal. The note emphasised the need to think long term and ignore short-term fluctuations, and cautioned against emotional responses to market movements. It also reassured clients that their portfolios are well diversified and able to cope with temporary downturns.
“A lot of clients have emailed back to thank us for being proactive and the reassurances. The odd client will ask if we should be making any changes, but we just remind them that the right approach is often the boring one that does not make headlines – that is, we need to be patient and not make knee-jerk reactions.”
Platforms move to reassure DIY investors
Advised clients will no doubt appreciate having a professional on their side who has experienced numerous market downturns and policy changes. A recent adviser poll by savings platform Flagstone revealed that post-Budget tax uncertainty is also currently driving increased demand for advice. The March survey of 198 members of Flagstone’s adviser community found 60% said clients value their advice now ‘more than ever.’
Elsewhere, investment platforms have also been taking steps to communicate with DIY investors and remind them of the core principles of successful investing in the face of whipsaw markets.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said DIY investors who use its platform may have been wrongfooted by recent market events. This will be especially concerning for those close to retirement or needing access to the money in their accounts soon for another reason.
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“Market turbulence can be a worrying time for DIY investors, but investors can take some comfort from the ability of long-term markets to recover from short-term crises. While this is a challenging period for the markets, taking a long-term view and focusing on the fundamentals should ensure investors are well positioned for the future when markets recover again.
“At a time when uncertainty is rife, Bestinvest urges its clients to stay calm and avoid doing anything rash,” she said. “Rather than panic and look for the exit, now is the time for investors to recall the basics of a long-term investment plan.”
Meanwhile, Andrew Prosser, head of investments at ETF platform InvestEngine, said it’s understandable that recent market turbulence would cause “jitters”, but he too is reminding clients about the importance of diversification and the fact that growth is not linear.
“For example, during the 2008 financial crisis the S&P 500 fell over 50% in dollar terms, but recovered from this in the following years. Anyone who invested in it at the time and stayed the course would now have investments worth significantly more than if they’d withdrawn their funds. Markets inevitably go through rough patches – whether caused by geopolitical instability, extreme weather events or economic tariffs – but people who invest in a diversified portfolio need to remember it’s about long-term returns rather than quick wins.”
This story was written by our sister title, Portfolio Adviser
