Behavioral Finance and Current Events

By Cheryl Harwell | Case Planning

Behavioral Finance and Current Events

The Coronavirus Pandemic and COVID-19: quarantines, temporary business shutdowns, market volatility, unemployment, gradual reopenings. All of this is enough, it seems, to challenge, if not shatter, our confidence. We are enduring a physical and emotional upheaval of our normalcy.

Because of the current situation, many of us are doing the wrong thing with our investments. We act emotionally rather than rationally. Important reasons to stay in touch with clients and prospects follow. When we help them through this upheaval, and they don’t end up making choices they will regret, you have a client for life.

  • Your clients and prospects need you now more than ever. They are concerned. They need a sounding board. They need reassurance and a voice of reason. They need calm. Having conversations with them can help ease their minds, and you might even learn something new about them.
  • Constantly watching the markets go up and down can make one miserable and can lead to rash, poor decisions. Selling all equities and moving only to cash or bonds is not a wise choice. One must look at investing for the long-term. You can help by simply telling clients to reduce their market and statement watching to monthly or quarterly. After all, isn’t it the overall goal to invest for the long-term?
  • Try to help your clients and prospects reframe the situation. Tell them to see the market drops as everything being on sale; that they should see this situation as a buying opportunity rather than a selling emergency. They will thank you later.
  • Use this time as an opportunity to reevaluate client risk and reevaluate portfolio allocations. Discussing risk tolerance during times of volatility tends to bring out more truth in how the client really feels about loss. For many, the negative impacts of past market volatility events have faded, or perhaps haven’t even been experienced. This situation can actually help ground clients and solidify their true tolerance for these situations.
  • Take the time to learn about changes from the SECURE Act and the CARES Act and subsequent legislation so you can help clients take advantage of new opportunities created by these laws. For example, clients who already received their RMDs for 2020 may return the dollars to their IRA. Clients who have not yet taken them do not need to get the assets this year. RMDs take one year off, all of 2020, courtesy of the CARES Act.

In summary, this is a tough time for all of us. You can help ease the difficulty by reaching out to your clients and prospects and helping guide them through. If you do, you will solidify and strengthen your client relationships. Your clients will appreciate this and, in turn, will most likely share some great referrals.

Would you like to discuss Behavioral Finance? Talk about prospecting in a downturn? Send me an email! Cheryl Harwell =

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About SPS Family

The SPS Family consists of two broker-dealers, Sigma Financial Corporation and Parkland Securities, LLC; a Registered Investment Advisory firm, Sigma Planning Corporation; and a back office, known as BD Ops, LLC. The companies, based in Ann Arbor, Michigan, are under common ownership and led by an experienced executive team. The SPS Family prides itself on personal service to independent registered representatives and investment adviser representatives from across the United States. We consider our representatives family as we strive every day to provide them “Independence. DELIVERED.”

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