As you’ll no doubt know, for some clients, this may be the first time they’ve been unfortunate enough to experience a significant downturn in their financial health as a result of falling stock-markets. For others it may be all too familiar. Either way the same fears exist; what do I do? Do I sell everything? Do I invest now prices are low?
One thing is certain; having a solid financial plan will help your clients remain calm and assured through such times.
It’s important to remind clients that just because markets fall, it doesn’t mean that their current plan is misguided. If their asset value is falling, you’ll be supporting them as they ask “why?” before considering a major sell off. They’d want to consider whether they were selling for sound, financial reasons or other outside factors?
Every setback creates an opportunity to appraise your client’s current situation and to make sure they remain on track with their financial goals. Identifying their key concerns and how those impact their immediate needs will be vital to ensure that both you and they emerge from the current crisis in relatively good shape.
TAKING A LONG TERM VIEW
Taking a long term view whenever investing in the stock market or assets driven by stock market performance is clearly vital. Short term price movements can appear unsettling but, after all, this is a long-term investment. History has shown that the stock markets will return and those losses should become gains over time. This is clear when you take a look at the historical performance of some of the major reference indices since 1998, which encompass a variety of financial quakes over this period.
Separating fact from fiction is key, as is reminding them to make important decisions about their investments using sound, financial reasoning and not out of fear and uncertainty. Now is the time to engage with your clients and to provide some reassurance that they have a sound financial plan in place.
CATCHING A FALLING KNIFE
You’ll be able to highlight that trading in a stock market with a lot of volatility or downward momentum is extremely difficult and it is not an exact science; you don’t always get it right. Selling assets that have lost value in an attempt to anticipate ‘the bounce’ can lead to more short term losses so perhaps for clients, trading their way out of the current slump isn’t wise, unless they can afford to take the risk. Market timing is not for the faint-hearted and can work against them if they are not entirely sure what they are doing.
Another approach may be to sit tight and ride out the uncertainty then, when the market shows signs of recovery, it may be the right opportunity to consolidate your client’s position and top-up their existing lump sum investment plan. Perhaps now is the time to take advantage of low prices and increase their position by investing further in the stock market?
As you’re aware attitudes to risk tend to be driven by the ‘here-and-now’ influences, such as our daily living expenses, our employment status, upcoming financial commitments or something as simple as making life a little more comfortable. That’s why clients need to take stock during volatile periods and review the reasons why they invested in the first place, and ask themselves, “What has changed?”.
RL360’s lump sum investment plans are medium to long term investments and so before making any decisions, clients should take some time to identify their priorities and plan accordingly.
When they want to top-up their existing lump sum investment plan, amounts start from as little as listed below.
