How to help clients avoid a ‘knee-jerk’ reaction amid market uncertainty

Almost three-quarters (73 per cent) of advisers agree that additional support is a necessity to effectively communicate with clients about the potential implications of ongoing political tensions, new data from Viridian Advisory has shown.

Viridian recently conducted a poll across its adviser network, which is made up of 41 practices and over 100 financial advisers, which it said has reinforced the need for advisers to receive support when navigating ongoing geopolitical influences.

While economic concern did persist, the firm said it was surprised by the 56 per cent of respondents reporting no client inquiries concerning the economic climate.

Similarly, advisers claimed that sentiments among clients remained stable, with more than half (55 per cent) expressing unchanged or neutral bearish perspectives, while 41 per cent observed that their clients exhibited a more pessimistic outlook.

Commenting on the findings, Viridian general manager Brett Arnol said that advisers need to remain conscious of clients’ overall wellbeing and financial security.

“During geopolitical tensions, there’s often a surge in uncertainty triggering potential stock sell-offs,” Mr Arnol said.

“Yet, within our network, our clients remain steadfast. Our clients are oriented toward long-term investments, a stance reinforced by the support our advisors provide.

“However, amidst this volatile landscape of uncertainty, market fluctuations, and escalating inflation and interest rates, there’s an evident need for additional support.”

As such, Mr Arnol said that advisers should remind clients of their long-term goals to maintain focus and avoid rash decisions prompted by sudden market shocks.

“Financial advisers have assumed an increasingly pivotal role, extending their support beyond conventional financial planning practices.”

Viridian chief investment officer, Piers Bolger, added that in 2024, cash rates will likely be at the helm of this uncertainty.

“While geopolitical risks along with ongoing military conflict will continue to impact financial markets, our key focus as we head into 2024 and the one that we believe will have the most significant impact will be the outlook for cash rates and by association inflationary expectations and the direction of bond yields,” Mr Bolger explained.

“It is clear central banks are now closer to finishing with rate tightening than they were at the beginning of 2023.”

According to Mr Bolger, Viridian is taking an optimistic stance for multiple asset classes thanks to these conditions, including equities, bonds, property and real assets.

“We believe this will translate into higher, more synchronised investment performance across financial markets through 2024,” he concluded.