5 ways to guide your clients through market volatility

Whether you’re an RIA, family office, or investment manager, you know that market volatility can be a rollercoaster ride for both you and your clients. It’s time to get ready to tackle even the most unpredictable market scenarios.

From rebalancing portfolios and tax-loss harvesting to personalizing how you guide clients through market turbulence, here are a few tips to help you navigate those ups and downs and achieve long-term investment success.

• Build a well-diversified portfolio

One way to minimize the impact of market turbulence is to have a well-diversified portfolio at both the asset class and risk factor levels. Financial advisors can assist clients in creating a diversified portfolio that includes a range of asset classes, such as stocks, bonds, and alternative investments like real estate and commodities.

Although inflation seems to be calming down, interest rates are still high, which may lead to liquidity issues throughout the industry. Additionally, the possibility of a recession remains a concern. As a result, advisors are turning to private markets as a source of fresh opportunities during periods of market turbulence. Launching funds during times of economic stress and market volatility can result in outperformance as valuations become more attractive.

• Rebalance portfolios

Regularly rebalancing your portfolio can help you maintain a desired asset allocation and reduce your clients’ exposure to risk while maintaining their target mixes. Regular rebalancing of portfolios also has advantages over merely reacting to market volatility. With a disciplined rebalancing strategy, you can effectively respond to current market turbulences and proactively prepare for future volatility.

Rebalancing is necessary whether you use a “buy and hold” strategy or one that emphasizes market timing during periods of high trading volume. By rebalancing your clients’ portfolios consistently, you can ensure they still are aligned with your clients’ investment goals and risk tolerances.

• Advocate a long-term perspective

Market volatility can occur over a brief period, and trying to time the market can be risky. Financial advisors can encourage clients to stay committed to their long-term investment goals. Staying invested over the long term is often the most effective way to achieve their objectives.

Many advisors are recommending all-weather portfolios that tend to perform well regardless of market conditions. This approach can help your clients stay focused on their long-term investment goals rather than being swayed by short-term market fluctuations.

To ensure long-term success, a disciplined process for rebalancing is key. Advisors who are guiding clients through buy-and-hold strategies must be able to adjust portfolios to accommodate changes in risk tolerance and preferences quickly.

• Get smarter with taxes

One of the most significant ways advisors can supply value to their clients’ portfolios is by managing their tax implications. You can achieve this by exploring opportunities for tax-loss harvesting, conducting year-round tax planning, and considering hypothetical scenarios.

Effective tax management can help clients adhere to their capital gains budgets and better position them for the future. Rebalancing technology can be used to evaluate different types of tax budgets or goal scenarios across all your clients or a subset of clients. By applying tax-sensitive rebalancing techniques throughout the year, you can ensure you consistently meet your clients’ investment policies and tax efficiency goals.

• Personalize models and service

In today’s environment, the importance of quickly scaling services to meet all client needs while providing tailored services cannot be overstated. Clients are looking for a more personalized experience that includes guidance on managing potential financial impacts and reducing risk.

Therefore, advisors must be adaptable and capable of personalizing your offerings to suit individual client situations. Tailoring portfolio models, responding promptly to inquiries, and adjusting clients’ preferences can help you demonstrate the quality, speed, and value of your services, and ultimately gain a competitive advantage. An advanced rebalancing solution can help reduce friction around service and scaling, allowing you to spend more time with your clients.

How to keep up with market volatility

While short-term volatility is inevitable, advisors must also consider its impact on retirement plans and intergenerational wealth over the medium- and long-term. This means revisiting your clients’ risk profiles and rebalancing portfolios in a personalized manner, as necessary. But you may be at a disadvantage if you’re still relying on spreadsheets for portfolio rebalancing.

As advisors navigate this changing landscape, technology is becoming an enabler of more sophisticated investment management approaches. Rebalancing technology can give you the speed and scale you need to:

• Stay abreast of market trends, timing, and client preferences
• Flex and evolve to sophisticated and emerging investment strategies
• Monitor accounts and keep clients informed of their allocations
• Test out strategies with instant calculations and what-if scenarios
• Perform large rebalances in lockstep with the market
• Reduce your clients’ tax burdens
• Ensure your clients are prepared for different scenarios

Clients want sound advice to navigate through challenging times. Persistent market volatility means advisors and asset managers must rapidly and proactively monitor and make tactical decisions throughout their investment portfolios. Therefore, advisors should consistently enhance their efficiency and performance to ensure their ideas can be executed quickly and accurately.

Markets are evolving at an unprecedented pace, and uncertainty is at an all-time high. Advanced rebalancing and trading technology can empower you to adapt to change, grow, and deliver more for your clients.