Advisor explains how to counter clients' negative news and conspiracy-fed fears
One advisor is helping colleagues counter fears among Canadian investors around conspiracy theories, potential recessions, depressions, and even nuclear war.
“I’ve been hearing many negative and difficult questions, such as: ‘What happens to my investments if there is a nuclear war? Or… what happens if the US dollar is no longer the world’s dominant currency? I’ve also been asked questions about recessions, depressions, and potential bank failures in Canada,” Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth told Wealth Professional.
He noted that the stress of this negativity is particularly salient now with all that’s been happening in the world for the past three years.
“People are bummed out about the recession, but we’re not in a recession. We haven’t had two negative quarters of growth in Canada, or the United States, for that matter. In fact, we’re still trending above zero in terms of positive growth,” said Small.
“But, I think people have been in this negative beaten-down situation since COVID, which took us to the brink of civilization, and I think we became very vulnerable to the negative side of things. So, someone who’s always looked at the glass as half-full now may be changed to seeing the glass as half-empty, and I think this overall negative sentiment is what we’ve been accustomed to living through for the last few years.”
Small noted that this grinding away of investors’ positivity has resulted from a long string of events. While the pandemic lockdown may have set the stage, Russia’s announcement not to tell the U.S. when it tests nuclear arms has heightened people’s fear. But, so has the current economic situation and the wealth of conspiracy theories, all of which are being amplified by the internet and social media.
“We advisors have to bring a sense of calm to investors. If we panic, they will,” he said. “They look to us to bring some rationale, some consistency and calmness, because they’re looking for someone to say it’s going to be okay.”
Advisors should regularly check in with their clients to see if there are any questions they can answer or concerns they can calm. Small recently sent out an email to address some of the questions he was hearing – such as what will happen if the US dollar is no longer the world’s dominant currency or what happens to clients’ investments if there’s a deep recession – and he was surprised how many clients reached back to say they hadn’t asked, but had wondered the same things.
“I think we advisors need to be proactive in reaching out to our clients, but we need to go one step further and ask: what is our investment strategy, based on this? We can take advantage of the situation because investments have fallen because of the negativity, and that’s not necessarily warranted. So, it brings a buying opportunity. “
Small noted that bank stocks are currently offering an investment opportunity, so advisors could take an overweight position in some of the largest U.S. or Canadian bank stocks.
Learn why should you invest in Canadian bank stocks in this article.
While advisors continue to be transparent, they can also provide clients with more education. For instance, market volatility offers opportunities as well as challenges. Interest rates can also peak and begin to decline again. Clients also should be advised not to check their portfolios online several times a day if they want to decrease their sense of vulnerability.
“Stay positive,” said Small. “People are depending on us to be that pillar of strength and have our finger on the pulse of the markets. You need to be transparent and tell them what’s going on – but tell both sides. It’s not always negative. You want to show people that, while there may be difficulties, there are also opportunities in there. The silver lining is big.”
