‘Get on the front foot’: How advisers are dealing with Trump tariff uncertainty

Trump’s so-called “Liberation Day” last week saw the US outline its reciprocal tariff policy that has resulted in severe falls across global markets.

While Australia has escaped with relatively modest direct impacts, the flow-on effects of a trade war have already taken a significant toll on investors, including the ASX’s largest single-day drop since COVID-19.

Understandably, many investors, including financial advice clients, are concerned about the volatility and uncertainty.

The key to allaying these fears, according to a group of advisers, is to “get on the front foot” and communicate with clients.

Speaking with ifa, Centaur Financial Services managing director and senior financial adviser, Hugh Robertson, said clients “don't need to know the answer to what's happening with markets”, they just need to know their adviser is there for them, overseeing it.

“We were all surprised by the rate of tariff, the breadth of countries that tariffs were placed on, and the speed at which it was to be implemented. It hit the markets quickly and hard. You've seen industry super funds not be able to deal with the amount of people trying to log in to check their balances,” Robertson said.

“Clients are rightly concerned, but we plan on these exogenous shocks to markets by diversifying portfolios and now is the time to understand the plan – if you are an accumulator it’s a great time to buy, if you are a retiree you have three-five years of cash there for pension payments and expenses.”

Robert Rich, director and financial adviser at Unite Wealth, explained to ifa that as soon as there was a “shift in tone” across the mainstream media reporting of the tariffs, his firm emailed clients to confirm events and what the impacts could be.

“I feel that this has negated the need for many clients to reach out and voice their discomfort because we were on the front foot. Our philosophy is to focus more on a lower-fee diversified asset allocation, rather than stock-picking and pulling levers on our clients’ accounts,” Rich added.

Similarly, Northeast Wealth financial adviser James O’Reilly told ifa that his firm got ahead of the tariff announcement to outline the “different possibilities and the likely flow-on if the tariffs did materialise”.

“Following the announcement on April 2, we’ve sent out further updates to outline how things are unfolding and avail ourselves should anyone be feeling uncomfortable. I’ve made proactive calls to a few members since; it seems that most are feeling well-informed,” O’Reilly said.

He added that this proactive communication isn’t to avoid getting calls from clients, but making sure Northeast’s members feel “confident and well-informed”.

“Beyond this step, all responses must be individualised. Our members are entitled to harbour some concern about this rapidly changing economic landscape, and people’s concerns vary,” O’Reilly said.

“If we’re still yet to resolve these concerns, they may require a little more assurance or have other concerns which we’ve not addressed. Although this type of communication can take time on a member-by-member basis, it’s an integral opportunity to build trust and strengthen our professional relationships.”

Nicole Gardner, principal financial adviser at Stellar Wealth, added that “no one is happy about what is happening”.

“Although any concern expressed is coupled with the relief they feel by working with us and the reassurance of the strategy and plan we have in place,” Gardner told ifa.

“I sent an email to all clients on Monday morning to acknowledge that this would be a volatile time and to reassure. I’ve only had messages of thanks come through. No one has told me they are panicking and want to sell.”

Trump on the mind

According to Rich, while the level of concern hasn’t been as bad as the “Covid Crunch”, the sweeping uncertainty is causing the most anxiety for clients.

“The world seems unsure what is coming next from Donald Trump – it feels like he’s living in a reality TV show and running the country as a producer seeking impactful and news-worthy policies to stay on the front pages of the newspaper,” Rich told ifa.

“Will he change his mind and issue a pause? Will further tariffs be levied? Will he cancel them altogether and find another strategy?”

The Trump factor is a significant contributing factor, according to O’Reilly, who said many clients perceive him as “impetuous and irrational”.

“This has contributed to a greater sense of unease and questioning whether there is further bad news around the corner, e.g. the US and China continuing to announce higher tariffs on one another,” he said.

The “uncertainty of Trump’s decision making” has also been a concern for Gardner’s clients, with a lack of clarity on timelines and decisions hurting confidence.

“Clients are bunkering down expecting a few bumpy years while he’s in office,” she said.

Robertson added that while the “rate of the tariff applied is what caught everyone off guard”, understanding the nature of the president could calm the nerves.

“We are reminding our clients that Trump, first and foremost, is a negotiator and starts high, and then will reduce at some point in time. And then systems can normalise,” he said.

“The anxiety from clients is going to be on when the market will go back up. We didn't know during COVID when it was going to go up, but it did. We didn't know when, after a rough year in 2022, the market was going to go up, but it did. This is no different.”

Getting defensive

In many cases, the advisers said, there has been a shift to a more defensive allocation in recent months, expecting some level of correction on the horizon after surging markets in recent years.

“Most clients are comfortable knowing that they’re still in a strong position given the growth they’ve received in recent years,” Rich said.

“Some clients that have been sitting with a lot of cash waiting for a correction to come have become more engaged, and we will work with these clients to consider the appropriate timing of when to come into the marke,t as it feels like more volatility is still on the horizon.”

Similarly, Robertson said his firm has been “a little more defensive” over the last six months, adding that he is hopeful they “won’t wear the brunt of the volatility”.

“But clients measure us in absolute terms, not relative,” he added.

“We have tried to stay ahead of the curve and keep our clients educated on what is happening and our house view, and then take phone calls from concerned clients and talk through their plan and why we need to stay invested.”

Time to profit?

Depending on the individual needs of clients, there could also be opportunities to capitalise on the “discount” in share prices.

“For retirees, it is really about understanding the portfolio mix of growth and defensive assets and looking at the managers within that mix. We use ones that do focus on protecting the downside which protects our clients in storms like now,” Robertson said.

“For accumulators, absolutely now is the time to ensure you are allocating into growth assets via a regular investment plan or your SGC. We see companies like Nike, Apple, Coca-Cola on an even greater discount to what price it will be 10 years from now.

“Whether you are a retiree or accumulator, if you have a lump sum of cash and want to deploy it the approach would be to dollar cost average over the next six months.”

Gardner agreed that it is important to understand the differing time horizons for clients and provide tailored solutions.

“Some younger clients want to be more aggressive, we are taking this on a case-by-case basis. With some clients we are now encouraging more of a dollar cost averaging approach to investing over this year, rather than large lump sums.”

For O’Reilly, he expects many clients will want a higher level of action from their advisers, again with “contrasting motivations”.

“On one hand, we’ll have some members predominantly focused on risk mitigation and concerned about how this current volatility impacts their portfolio balances,” he said.

“On the other hand, we’ll have members who wish to profit from this volatility, likely by way of making further investment contributions or adjusting their asset allocations to have higher exposure to growth assets.

“Our business has successfully made tactical asset allocation changes in the past, but I’d like to have higher conviction on markets before this could be considered. For now, we’ll be managing portfolios on a member-by-member basis.”