Amid raging wars and government dysfunction, it’s no wonder that some investors fear a stock market collapse. They figure the worst is yet to come. This puts financial advisers in a familiar role: handholding.
But emotions can get in the way. “Right now, most people are thinking borderline apocalypse,” said Cameron Valadez, a certified financial planner in Riverside, Calif. “There are so many global issues going on. But when you look back, you see so many crises. It felt the exact same at the time as it does today,” yet the crises passed and markets recovered.
He may also point out that since 1937, the S&P 500 has a 93% chance of producing a positive return over any five-year period. For retirees worried that they lack enough time to outlast a sustained downturn, Valadez tells them that the S&P 500 has a roughly 88% chance of positive performance over any three-year stretch.
Eric Amzalag, a certified financial planner in Woodland Hills, Calif., guides new clients through an exercise using “Eisenhower squares.” Also known as the Eisenhower matrix, it involves drawing quadrants and labeling each box based on what’s urgent and/or important. Inexperienced advisers may try to calm anxious clients by appealing to logic. But that rarely works if someone’s too emotionally wound up to listen. “When I first started as an adviser 16 years ago, I’d make the mistake of thinking that what was on my mind was the same thing that was on the client’s mind,” said Rene Bruer, a certified financial planner in Colorado Springs, Colo. “But I learned that what’s triggering their fear can be totally different.