Just like the changing weather can influence mood and productivity, it can also impact investing behavior. Research shows that at the first sign of spring, newly optimistic investors have more risk tolerance. In autumn and winter, daylight decreases and so does our mood, which in turn can cause investors to become more conservative about risk.
These seasonal impulses to buy and sell can be difficult for investment advisers to navigate. With spring now in full bloom, take notice of your clients’ behavior, and respond accordingly. Here are three ways advisers can help ensure that their clients are not making emotional, seasonal investment decisions:
1. Stick to the plan
A financial plan is set up for a reason. It captures an investor’s current situation, future goals, and the agreed-upon path to reach them. When clients deviate from the plan, they risk derailing their long-term goals in place of short-term satisfaction.
If your clients start asking about changing their investments, and you’re not entirely sure why, bring the conversation back to their plan. Ask them how their suggestion will help them reach their financial goals. If they are having a hard time telling you how their idea supports the plan, reiterate why their current investments continue to be the best solution.
2. Know your clients
The financial adviser-client relationship is like any other relationship. Over the years, trust is built through open and honest conversations. You learn what makes your clients tick, what their passions and fears are, as well as their risk tolerance. This foundation is a baseline for understanding their typical behavior, and can also provide insight into when they may be acting uncharacteristically.
If you start to notice unusual behavior in a client’s investment ideas, try pointing it out. It is highly possible your client doesn’t realize they might be triggered by seasonal patterns, so this feedback can be valuable — they can’t change a behavior until they are aware. Talk to your client about how seasons affect investors, and explain how it may apply to them. These sometimes difficult conversations can deepen the trust your client has in you, in addition to safeguarding their financial future.
3. Connect clients to resources
You have the opportunity to help your clients beyond just protecting their investments. Be a resource to enhance their life. Introduce them to people who can help them find volunteer opportunities. Help them rekindle their passion by connecting them to activities they are interested in.
To be a true resource for your clients, surround yourself with experts who can help your clients no matter what they’re dealing with. Whether they have questions about aging, caregiving, housing, transportation, or social engagement, have referrals to provide to your clients. You don’t need to have all the answers, but you need to be able to point them to someone who does.
Julie Genjac is a registered representative of Hartford Funds Distributors, LLC.
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