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The road to investing is lined with many potholes. After a long, relatively smooth ride, some clients may be startled by the bumps. How do experienced financial planners guide their clients on handling market volatility? We asked a half-dozen top advisors to share their wisdom.
EDUCATE AND PREPARE
"Setting the table is paramount," says John Wolff, chief executive and managing director of Capital Fiduciary Advisors in Leesburg, Va. "Clients must have appropriate expectations. We try to make it clear if you can't stand the volatility of equities, then you shouldn't own equities."
Stressing the importance of realistic risk tolerance to clients and the inevitability of encountering volatile markets are also critical, advisors say.
"We try to instill the idea over time that anybody in risk markets will encounter these periods of volatility," says Mark Hamby, chief executive officer of KMS Financial Services in Seattle, now a part of Ladenburg Thalmann's independent broker-dealer network. "When assessing the risk tolerance of clients, it is absolutely essential to keep these periods of volatility in mind, but it's never easy to do. We tell clients that if you have to have a certain result by...