The results of our recent survey indicate many investors are presently more concerned about how the COVID-19 pandemic could impact their health and the well-being of loved ones than about incurring losses in their portfolios. Retirement and wealth strategies expert Matt Sommer explains what these findings mean for financial professionals and how they should approach conversations with clients.
After watching the stock market drop from record highs into bear market territory with alarming speed, one might assume that investors are hyper-focused on the losses they have likely incurred in recent weeks. While the extreme market volatility we are experiencing is no doubt stressful, the findings from a recent survey we conducted indicate that the financial markets are not necessarily top of mind for all investors.
To gain a better understanding of how investors are feeling about the COVID-19 pandemic and the impact on their financial holdings, Janus Henderson surveyed 1,004 adults in the U.S. on March 16-17. Topping the list of concerns weighing on respondents was the potential for themselves or a loved one to contract the virus, at 42%. General unease regarding the economy and jobs was cited as the second-greatest source of concern, at 23%, followed by the day-to-day disruption of life at 17%.
As for the percentage of respondents who cited the markets and the potential for investment losses as their top concern? That number, surprisingly, was only 8%.
Shifting the Focus of Client Conversations
In my opinion, these findings represent an important takeaway for how financial professionals should approach conversations with clients. While many financial professionals may have assumed that their clients’ primary concern was their portfolios, it appears that – at least for now – the pandemic itself has overshadowed investment anxieties for many people.
Financial professionals should be sensitive to the fact that clients may be struggling to adjust to today’s “new normal.” While clients will likely want to talk about their accounts eventually, it may be best to start conversations by asking how they are coping and inquiring about the well-being of their families. Financial professionals may also want to ask how clients’ lives have changed – they have likely made significant changes in their daily work and home routines, for example – and determine if any major changes in their financial situation may need to be addressed.
Staying the Course … for Now
There is one potential upside to the fact that investors’ concerns about their health and the well-being of their loved ones seem to be overshadowing thoughts about what to do with their portfolios. And that’s the fact that most investors appear to be staying the course – at least for now. Of the 589 respondents who invest in the financial markets, nearly two-thirds have taken no action since the beginning of the market correction. And while about half said they are watching the markets more closely than usual, 14% said they are checking even less often now.
Of course, it is open to interpretation whether investors have left their portfolios intact because they are too preoccupied with the larger concerns of how the pandemic could impact their families. But our survey did find that investors appear to be far more optimistic than one might assume: The majority of the full sample – 66% – said they believe the stock market will be higher a year from now. (Only 15% believe it will be the same and 19% believe it will be lower.)
What does this mean for financial professionals? First, they shouldn’t assume that all clients are panicked or upset about their portfolios. Many savvy investors have experienced severe downturns in the past and understand the importance of maintaining a long-term perspective. For clients who are inclined to sell out of stocks, financial professionals should ask them to envision their future self two years from now and imagine the sense of regret they would feel if the markets do in fact rebound. Financial professionals may also want to consider sharing with clients that while every situation is different, their fellow investors are for the most part holding firm. People’s behaviors are strongly influenced by the actions of others.
Clear Communication and Concrete Action Steps
During periods of market turmoil, ongoing communication is key. Financial professionals should offer unnerved clients the opportunity to talk regularly at a predetermined time, even if only for a few minutes. While the current situation may not change much in between those conversations, most clients appreciate knowing their financial professional is readily available in the event any changes are necessary.
Among the sample we surveyed, 251 respondents work with a financial professional or financial planner, who were described in the survey as professionals who provide ongoing advice, rather than facilitate a single transaction. The majority of respondents (58%) claim that their financial professional or planner has proactively contacted them to discuss the recent events in the market. Generally, respondents have been satisfied with the performance of their financial professional or planner over the last month, with 55% extremely or somewhat satisfied. Approximately 24% feel neutral about their financial professional's or planner’s performance, while 21% are somewhat or extremely dissatisfied.
These findings are encouraging, but there are a couple of things financial professionals may want to consider as they continue with their outreach in the weeks and months ahead. In the midst of such extreme volatility and uncertainty, we think it is critical to provide clients with tangible action steps and to avoid vague comments such as “We are keeping a close eye on things.” For example, a relatively small percentage of our respondents reported receiving specific guidance such as implementing tax planning strategies, considering a Roth conversion or refinancing their mortgage. Yet these are the types of concrete action steps that many clients find valuable and reassuring as they are likely struggling with feeling a lack of control.
Additionally, financial professionals should consider including both the household’s primary and non-primary decision-maker or point of contact in their conversations to ensure the lines of communication are open and all clients are feeling acknowledged.
An Opportunity for Financial professionals to Demonstrate Their Value
These are clearly challenging and unsettling times we are experiencing from a social, economic and, yes, a financial markets perspective. But this is also an opportunity for financial professionals to remind clients that their role is to provide more than investment recommendations – they are also here to offer support to clients who are worried not just about their financial situation but also about the health of the people they value most in life and about what the future may hold for the world around them.
The good news is, one final finding from our survey offers hopeful evidence that people recognize the value of professional financial advice during times like these: Among those who do not use a financial professional or planner, the recent market correction has prompted 20% to reconsider their decision.
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