It often comes as a surprise to clients that markets, and their investments overall, have been relatively buoyant over the past year.
That surprise is understandable. News headlines are rarely reassuring, dominated by tragedies in the Middle East, political uncertainty from the US administration, and a steady drip of speculation about tax changes in the run-up to the Budget.
In environments like this, advisers are often the calm, steady voice cutting through the turbulence of a 24-hour news cycle and the misinformation that can swirl on social media.
We also empathise with clients. We understand the support they need when we sit down together: revisiting their plans, explaining market movements, and putting their minds at ease.
Yet reassurance can fade quickly. By the time the next meeting comes around, the headlines may have left them feeling anxious again.
Global geopolitical instability is emotionally unsettling, but the impact on most markets is often limited
The real danger lies in knee-jerk reactions. Clients may be tempted to pull out of investments in volatile periods, risking permanent loss of wealth if markets bounce back, as they did after the Covid outbreak or more recently following President Trump’s ‘Liberation Day’.
Equally damaging are irreversible financial decisions made on the basis of speculation. Around each Budget, politicians float possible reforms in the press to test public reaction.
Before the Autumn 2024 Budget, there was widespread fear that the government might cut or withdraw the tax-free cash allowance from pensions. Some investors withdrew funds early, hoping to reverse the action within the 30-day cancellation window.
But most platforms were unable to process reversals, leaving those investors financially worse off when the change did not happen.
So how do we help clients avoid such costly missteps?
One way is by bringing them back to the facts. Global geopolitical instability is emotionally unsettling, but the impact on most markets — and therefore on their own financial plans — is often limited.
Victoria Ross: The wealth journey is more achievable with a guide
Clients can also overestimate the effect of a change in government or legislation. These are good moments to remind them of the value of global diversification in their portfolios.
Proactive communication is equally important. When markets fall sharply — as they did in response to Trump’s tariffs — personally reaching out to remind clients of their long-term strategy can help them stay invested with confidence.
When underperformance lingers, it is an opportunity to show why we recommended keeping a cash buffer or how their multi-risk pot reduces the need to draw income and crystallise losses during downturns.
Putting events in context is another powerful tool. Clients often feel that current turbulence is the worst they’ve experienced, forgetting even recent history. Visuals showing historic market performance can help reframe their perspective and illustrate how recovery follows decline.
And forewarned is forearmed. In early relationship meetings, or during calmer periods, it is worth preparing clients for the reality that they will experience negative years. Showing them the potential short-term downside — alongside the historical recovery that follows — provides comfort and builds confidence for when volatility returns.
Cashflow modelling and scenario analysis are invaluable in stress-testing plans against market shocks or policy reforms
Legislative change is another challenge. Structural shifts, such as pensions becoming subject to inheritance tax, take time to implement. But other measures, such as the capital gains tax changes announced in the Autumn 2024 Budget, can take immediate effect.
Advisers cannot predict outcomes, but we can guide clients through decisions by exploring both scenarios and showing the possible impacts if changes do or do not materialise. Cashflow modelling and scenario analysis are invaluable in stress-testing plans against market shocks or policy reforms.
Ultimately, our goal is to keep clients’ plans on track so they achieve their objectives. Time and again, clients tell us that peace of mind over their financial security is the most valuable wealth we can deliver.
Victoria Ross is a chartered financial planner with Progeny
