Clients keep their cool as stocks tank


With the U.S. stock market officially in bear market territory in response to the global COVID-19 pandemic, financial advisers say clients have been surprisingly calm and mostly quiet.

“We’ve got clients that are seeing this as a buying opportunity,” said Rick Buoncore, managing partner at MAI Capital Management.

“We don’t think this is the bottom and we’re telling them to not put it all in the market at once, but some of our clients that have been underinvested in equities are seeing this pullback as a time to enter the market,” Mr. Buoncore said.

Andrew Langdon, an adviser at FivePoints Financial Planning, is seeing a similar reaction from clients who he says have been programmed to buy the dip during the historic bull market.

“Most of my clients are under the age of 40, and they’re looking at it based on what they’re seeing on the news,” he said. “They’re trying to take advantage of short-term declines by using some of their emergency cash to invest.”

Although not all advisers are facing the same challenge of preventing clients from jumping headlong into the market as it continues to fall, the general attitude among investors is different from what some were anticipating.

“The last three or four calls I’ve gotten were clients looking for things to buy in this market, and that’s not what I would have expected,” said Tim Holsworth, president of AHP Financial Services.

“One client, who’s in his 70s and in a really conservative portfolio, asked if there was anything he could sell in order to buy more stocks,” Mr. Holsworth said. “I told him I couldn’t recommend that because it would violate his risk profile.”

But not all clients are feeling the urge to buy low. Mr. Holsworth said two of his 400 clients have opted to sell everything and ride it out in cash.

[More:

The S&P 500 Index, which is down nearly 23% from the start of the year, is coming off an 11-year bull market that saw the index gain 401%.

With the index most recently shrugging off a 20% drop in late 2018, financial advisers are realizing that a lot of their clients are only familiar with up markets.

On Friday, a survey of 852 financial advisers who custody with TD Ameritrade found that 64% have not made adjustments to client portfolios, while 26% said they have made moderate changes recently and 9% said they have made “large-scale changes” to client portfolios.

Following Friday’s spike of nearly 10% in stock prices on reports of increased efforts by the federal government to combat the virus, the market opened sharply lower on Monday as expected, despite the Federal Reserve’s Sunday announcement that it was cutting short-term interest rates to near zero.

“We’re not getting much in the way of panic from clients,” said Ben Pace, chief investment officer at Cerity Partners. “What we’ve gotten after an 11-year bull market is clients conditioned to buy on the dips, but once you break into bear market territory, it’s about sticking with the plan and being long-term investors.”

“Right now, clients are mostly looking for regular updates from us,” Mr. Pace said.

Even clients who have become comfortable with some level of market volatility are still looking for open lines of communication with their advisers.

“In general, people are asking me what is going on right now, how far the market will drop, and whether they should do anything differently than they’re doing now,” said Mike Caligiuri, founder of Caligiuri Financial.

Paul Schatz, president of Heritage Financial, said several clients have expressed uneasiness about where the financial markets are heading.

“There are different levels of concern with each client, as some are really in panic mode and others are just looking for reassurance,” Mr. Schatz said.

Thomas Balcom, founder of 1650 Wealth Management, said half of his clients have allocations to various structured products that offer degrees of downside protection, but he still expects clients to be “shell-shocked” when they get their March statements.

“Clients aren’t happy about what’s happening to the markets, but this isn’t something you can plan for,” he said. “I’ve been trying to be proactive by sending out emails about the virus and about portfolios, because I don’t want to be reactive.”

Written by Investors Wallets

SEC chief rejects speculation markets should be shuttered

Financial advice industry shuffles conference schedules