‘Whatever emotion they give you, it’s right’: Helping clients navigate downturns

Markets have rebounded from the initial shock of US President Donald Trump’s tariff announcement, but how an adviser deals with their clients during tough times can have advantages beyond navigating the immediate situation.

Speaking on The ifa Show, Complete Wealth financial adviser Dr Ben Nielson explained that regardless of how a client is feeling, it’s valid.

Nielson said when a client is expressing concerns about facing capital losses in the short term, the question he asks is: “Why does this bother you?”

“You’re not accessing it for a couple of years, it has to get there anyway … What am I missing here? And they go, ‘I’m scared’,” he said.

“And you go, ‘Cool, that’s great.’ Whatever emotion they give you, it’s right, it’s valid, it’s just great. Of course you’re scared. You’ve been in the market for two minutes. You just met me. I’m an idiot. I’ve been living with me my whole life. Let’s get through this together.”

The main cause for reservation, he added, would be an overexposure to a single sector and the client is “hoping it comes off”.

“If you’re holding an array of stuff with big balance sheets and big histories of dividends, you’re probably going to be OK. They just want someone to listen,” Nielson said.

Similarly, clients need to trust the person they’re working with, which is where a strong relationship comes in – and the ability to use historical data to demonstrate how markets perform over the long term.

“I often find myself saying to clients, ‘If we did this thing now and COVID hit tomorrow, this is materially what it would look like’,” he said.

“Then we bring them back to the initial concept … Let’s just say we reframe it. Let’s just say we need to get to your account to $1 million and you’re sitting at [$700,000] now. What are the non-negotiable things that we can do to make sure that this gets there by this time frame? So, it doesn’t really matter too much about the tariffs.”

Another example Nielson uses with clients is that if a house around the corner is worth $1 million, and it went up for sale at $950,000, would you buy it? To which the answer is invariably yes.

“Explain to me why, or don’t even say it out loud, just explain why and then apply that exact same theory to whatever environment that we’re dealing with,” he said.

“So, if you’re buying high-quality S&P index or whatever that is and you see a 10 per cent haircut and you were going to get there anyway because we usually have some form of consistent contribution or dollar cost or non-concessional downsize or whatever – it’s getting there, whether it be now or seven years and you’re retiring or whatever that period is. Why would you not buy it now with a haircut?”

That doesn’t mean individual circumstances can’t play a role, with Nielson adding that understanding how they are positioned is another key factor in the plan going forward.

“Just ask the questions: ‘Have you got any big expenses coming up? How are we sitting with cash? Do the kids need anything? Is there anything that you haven’t told me?’,” he said.

If the answer is no, then “just ride it out”, he added.

To hear more from Ben Nielson, tune in here.