How to Talk to Your Clients About Weathering the Storm

One of the highest values a financial advisor can offer to clients during turbulent and emotional times is perspective. While a client may see only the value of their portfolio in a given moment, you have the experience and expertise necessary to help them see the larger picture.

And if you can avoid cliches (like the oft-mentioned “stay the course”) and instead reference hard data to help reassure the people you serve, all the better.

Thankfully, you have access to that kind of hard data in Kwanti to support your conversations.

Here’s how you can discuss long-term investing, diversification, and realistic expectations with your clients to keep them confident and give them peace of mind, even when the markets aren’t trending up.

Take a Long Term View of the Markets

Caution your clients to avoid looking at a short time period, and instead zoom out to have them focus on their entire invested lifetime.

In the graphic below, you can see a five years snapshot of equities, as represented by the S&P 500 Total Return index. Over this time period, equities had a 5.02% annualized return, even including the recent market drop (as of 3/19/2020).

This number is consistent with generally accepted long-term expectations for equity returns.

Demonstrate How Diversification Works

Every financial advisor knows a balanced portfolio of stocks and bond is less exposed to unexpected crisis, but sometimes your clients need to be reminded of that as well.

The image below shows the recent stability of the US bond index (orange line) in contrast to the S&P 500 (shown in green).

By creating the traditional balanced portfolio of 60% stocks and 40% bonds, you can clearly show clients how their portfolio may be experiencing fewer losses than a portfolio invested 100% in equities (blue line).

In volatile markets, providing this comparative perspective to your clients can be critical to giving them confidence in the portfolio they’ve chosen.

Set Realistic Expectations

Showing clients that their portfolio hasn’t lost as much as it could have can provide some relief, but it also doesn’t completely dull the pain of a volatile market.

It’s important to be transparent about market uncertainty, even as you do what you can do calm client nerves during times of losses.

Based on all we know today, the global health and economic crisis is not over, and recovery will likely be slow. You need to also set reasonable expectations for what clients can anticipate in terms of recovery time.

In the 2008 financial crisis, we can define recovery as measured by the time necessary to reattain the pre-crisis valuations. In that scenario, the S&P 500 took three years to get back to those valuations.

That recovery was long, and required patience, but it also was a crucial time to invest in equities to participate in that recovery.

Already using Kwanti? Log in now to access these charts and many more to assist you in keeping your clients calm and confident.

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History extended to 25 years

The maximum history window for performance has been extended from 20 years to 25 years. This ensures that you can illustrate the late 90’s bull market and subsequent 2000 bear market.

In a future release, we plan to further extend the window to 30 years of history.


Blended Models

Create a blend of individual models with a weight assigned to each component model. For example, a blend of sleeves for different asset classes:

We designed this feature for maximum flexibility. You may:

  • Blend models created within Kwanti, or models imported from our integration partners.
  • Blend models that have their own history
  • Use a weighted average of fees from component models or overwrite this with a value for the blended model
  • Choose from many rebalancing strategies for the blend

To create a blend, click New in the application main screen, then select Blend:

 

Consult the documentation for details and a video tutorial


Favorite dates

When using specific dates for performance display, avoid repeating manual entry of these dates by using the favorites list.

 

 

To add/remove dates in the favorites list, make sure that Date is selected, then click on the down arrow at the right of the calendar as shown in the above picture.

 


Income and yield

Portfolio income is important for some clients. This analysis estimates the portfolio yield and the timing of portfolio distributions in the next 12 months.

  • Drill down to the income estimate and the yield detail calculation tables
  • Compare the income and yield of two portfolios or models
  • Include this analysis in the PDF proposal

Consult the documentation for details and a video tutorial