Market Volatility: A Relationship-Building Opportunity for Financial Advisors


Head of Practice Management

  • Every market shift and every news story has the potential to tempt clients to abandon their financial plans or investment strategies.
  • Both new investors and those nearing retirement are particularly vulnerable to overreacting when sharp downturns occur.
  • A goals-based approach helps clients avoid counterproductive behaviors and pursue their financial goals with confidence, especially in stressed markets.

Global risk assets finally stumbled in the first half of 2022 after three consecutive calendar years of above average performance. This — along with tightening monetary policy, the Russia-Ukraine conflict, rapidly rising interest rates, and surging inflation — has roiled markets and rattled investor sentiment.

In volatile times like these, providing advice goes beyond asset allocation and retirement projections to include managing client behavior. In other words, helping them understand the potential risk of trying to time the market and stay focused on their long-term financial goals.

Risk of Trying to Time the Market

Market downturns are always unsettling, but reflecting on the market volatility in 2020 may help keep things in perspective today. When the S&P 500 Index experienced a sharp downturn on March 16, 2020, stocks dropped nearly 12% in a single day — one of the worst one-day returns in history. The uncertainty of a global pandemic and the risk of a prolonged lockdown made it easy to get caught up in the fear of a major correction. But investors who sold stocks in March missed the market rebound; the S&P 500 ended the year with an annualized total return of 77.58%.1

Trying to time the market usually comes at a cost. This is a critical message to convey to clients vulnerable to selling the dip — it’s simply impossible to know when exactly the market will hit bottom or when to jump back in.

Managing Client Expectations In Volatile Markets

Two client types in particular may be vulnerable to making poor investment decisions when volatility strikes: new investors and those nearing retirement.

Younger Investors Have Never Seen a Bear Market

Younger investors or those who started investing after the 2008 Global Financial Crisis have only ever experienced a bull market.

Number of Days with Market Decline Based on Year of Birth

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1 Bloomberg Finance L.P., based on daily returns since 1950 for the S&P 500 Index. Calculations by SPDR Americas Research. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable. Past performance is not a reliable indicator of future performance.


The tendency of a market index or security to jump around in price. Volatility is typically expressed as the annualized standard deviation of returns. In modern portfolio theory, securities with higher volatility are generally seen as riskier due to higher potential losses.

Originally Posted July 25, 2022 – Market Volatility: A Relationship-Building Opportunity for Financial Advisors


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