While the volatility in markets has eased over the month since US President Donald Trump imposed wide-ranging tariffs on all of its trading partners, the impact for clients continues to be felt.
The S&P 500, for instance, has regained much of the value it lost in the immediate aftermath of the Liberation Day announcement, so clients that listened to their advisers and avoided panicking should be feeling more at ease.
However, according to Complete Wealth financial adviser Dr Ben Nielson, the Trump-imposed volatility provided a valuable education opportunity for clients.
“If we look at, say, the S&P over the last three or four months, even with the bounces, it’s sort of moved between 8 and 10 per cent, which is a bit of a challenge. If I put a million bucks in and I check my balance next week and it’s $920,000, I’m not going to be happy,” Neilson said.
“So, what we’re trying to do is use these experiences and use these market movements as a catalyst for some of our clients’ behavioural shifts.”
Explaining the concept with an example from some of his own clients that had sold a real estate business and had to make a CGT election, he said they had the same amounts but the contribution times differed by a few days.
“One managed to get it in … when the markets had fallen,” Neilson said.
“His business partner who had his life sorted managed to make it like a week earlier. So there was about a 4 or 5 per cent variance.
“One couple is up $90,000 or $100,000 by now, which is fantastic, right, because they think I am God. And the other couple who did the exact same thing is only up like $30,000 or $40,000.”
This specific example, he added, can highlight how short-term fluctuations can make a significant difference, yet over the long-term, you are “still ahead of the eight ball”.
“[We explain to clients that] these are the types of scenarios that you may be subject to and this is what it may look like,” Neilson said.
“It sort of steps out from the conventional risk profile because if you do a risk profile … it doesn’t talk about the micromanagement, the day to day.
“Most times out of my 14- or 15-year career, whenever we’ve put money into an environment and the client has visibility, the markets fall the next day. We have these experiences, and we’ve got quite amount of quite a significant number of clients now, we have a stupid amount of experiences all the time and we can grab those and leverage those and use them for content or examples or when we’re signing clients and talking about specific things, we can say somebody in this office experienced this very thing a couple of years ago and here’s what we did.
“The cool thing about it is that regardless of what dear Mr Trump does, we are beginning to design a standardised response to volatility that helps design the client’s behavioural responses as well.”
