The financial plan is a core touchstone in all of these conversations. When clients feal a strong fear of missing out (FOMO) on further upside, Inglis can remind them that their plan may only hinge on an average annual return somewhere in the single digits. A hypothetical 25+ per cent return on their equities this year, therefore, puts them ahead of their return goals. Pulling a bit off the table to secure those gains is therefore a prudent decision in the context of the plan.
That is not to say every client is gripped by FOMO and wants to let their equity allocations keep riding. Investors inherently feel loss more acutely than gain, and Inglis says that while clients may not come to him expecting a crash, they may ask him directly what should be done with their gains. Â
As much as the plan functions as a touchstone, Inglis notes that gains like these could prompt a reassessment of the key inputs in a plan. Has the rise in equities fundamentally changed a client’s risk appetite, their willingness to accept a loss, or their comfort level around volatility? There are opportunities in the communications process to revisit some of those questions and see if their answers could inform a change in overall strategy. That could be as simple as adjusting a rebalance to maintain a slightly higher equity allocation.
Talking about gains and losses and plans also must hinge on the goals that the plan serves. If this year’s market gains mean a client can take their dream trip a year earlier, or help their grandkids buy a house, or make an impact on somebody’s life, Inglis will ask if they want to do that. Drawing down on an outsized gain to serve a client’s life goal can be an entirely justified use of these market wins. It’s important, Inglis notes, that advisors don’t lose sight of the goals with their clients. If the conversation is just about returns maximization and risk, then something essential is being lost.
Through all of these conversations and permutations, Inglis emphasizes the consistency of his messaging, his tone, and the media by which he’ll reach clients. They receive email updates and phone calls, they’ll never get a text from him because that medium has a different — more urgent — implication. He’ll use key phrases to reassure, like ‘rash decisions,’ or ‘follow the herd’ to dissuade panic when markets are down. He’ll advise against a heavy focus on the news because of the emotional response that modern news media is meant to elicit.
