Mind over matter: Shifting clients’ view on volatility

When the stock market dips unexpectedly, many clients can go into a sort of panic; however, Centaur Financial Services chief executive Hugh Robertson said part of an adviser’s role is to shift the mindset of clients to see these events as opportunities rather than just financial losses.

Drilling down on this idea, Robertson said on The ifa Show that how people think about volatility itself is often negatively skewed despite the fact that volatility just means a period during which markets are fluctuating either up or down.

In order to craft a well-balanced portfolio, growth assets will likely be involved to some degree based on the client's risk profile and what life stage they are in. One of the realities that advisers need to prepare clients for, according to Robertson, is how market changes will impact them over time.

“The one thing you’re going to get with a growth asset is volatility. It’s a guarantee. You know, same as in life, death and taxes, it is a guarantee you’re going to get volatility. Volatility isn’t a euphemism for loss,” Robertson said.

“Volatility goes both ways. You know, when the market goes up, we don’t say, ‘Oh geez, the market’s been volatile going up so much.’ I don’t know why we don’t, but we don’t. We just think that that’s because we’re a genius when we bought it.

“But we’ve got to just be realistic with everything and say, the purpose of the growth assets, if we’re talking about retirees, it’s to overcome inflation risk and sequencing risk.

“And you go, if we navigate those three risks with a portfolio balance between growth assets and defensive assets, you’re going to get a really good outcome.”

By educating clients, Robertson explained that advisers can significantly reduce their stress when markets inevitably experience turmoil.

Reflecting on the times surrounding US President Donald Trump’s tariff announcements in April that sent markets spiralling, Robertson said his firm’s clients were largely free of anxiety, seizing the opportunity to buy stocks “on sale”.

“Clients weren’t calling us panicking. We had a few astute clients that said, ‘Hey, should we put some more in?’” he said.

Robertson added: “If you really like a stock at 100, you should love it at 80, provided the fundamentals haven’t changed. So, you know, that’s where we always advocate for our clients.

“We try and sort of tell them, ‘When the market goes down, give us a call and let’s go shopping, let’s buy things on sale’, and they’re pretty good with that.”

To hear more from Hugh Robertson, tune in here.