Keeping long-term plans in mind when markets get rocky

As market volatility continues to cause upset among investors, Scott Carmichael, a founding partner and investment adviser at Escala Partners, said advisers need to stick to the “golden rules” as they guide clients through this turmoil.

“Market volatility today is no different to any other upheaval over the past few decades,” Carmichael said.

“What sees investors through these times is following the golden rules – long-term investment in high-quality, diversified assets across, and within, asset classes.

“That is the way for long-term outperformance. The risk of short-term underperformance comes from making the wrong decisions at the wrong time, that is making emotional, behavioural-type decisions.”

According to Carmichael, when it comes to investing, advisers should be steering clear of speculation, avoiding concentration risk and having a deep understanding of personal liquidity needs, income requirements and a clear view of the client’s family circumstances.

Adding to this, Ben James, also a co-founder and investment adviser at Escala, argued that attempting to time the market can often be futile and ultimately hurt long-term gains.

“Timing getting in is hard, but timing to sell is even harder. In periods of volatility like we saw in April, we reflected on our long-term rules to stick with high-quality investment managers, let capital compound, use asset allocation as your key defence and trust the process,” James said.

While providing financial guidance is generally an adviser’s primary purpose, Carmichael explained that supporting clients emotionally through the lows as market shake-ups can leave them feeling anxious and concerned, making it essential that advisers keep clear communication lines open.

“Advisers often act like psychologists. We need to make sure that we’re communicating in both good and bad times, and stress-testing our client portfolios,” Carmichael said.