Advisers set for 'damage control'

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Advisers may have some work to do today to remind their clients of the importance of sticking to their long-term goals.

Thursday, November 10th 2016, 6:00AM 1 Comment

by Susan Edmunds

Michael Dowling

Markets were sent into turmoil overnight by the surprise victory of Donald Trump in the race for the US presidency.

Futures trading on the S&P500 and Nasdaq fell so sharply that it triggered trading curbs.

The NZX50 closed down 3.3 per cent at 6664 and the ASX200 in Australia slipped 2 per cent to 5153.

Michael Dowling, president of the Institute of Financial Advisers, said there would be two types of damage control for advisers to attend to today.

The first was to do with the market, where there was little action they could take. “It’s a bit like Brexit where we anticipated some reaction and it may be different to what was expected but that’s the markets.”

But he said advisers could play a bigger role with managing their investors’ behavioural response.

“Around these events, people can overreact. It’s good to have an adviser as a sounding board to say ‘I was thinking this, what do you think’. That’s one of the big benefits an adviser offers. It’s a significant event but does it impact on the goal you are trying to achieve?”

He said advisers could remind clients that it was a four-year presidential term when often still had decades until retirement. “I do expect there will be some damage control but it’s more a discussion with advisers and clients – how does this impact the plans I’m making?”

Adviser Simon Hassan agreed: “They need to remind clients that unexpected outcome always lead to overreaction. Most should do nothing. Those who have extra cash should consider adding it to portfolios. Those contemplating withdrawals should delay if they can. The market - and some common sense vigilance - will do the rest.”

Adviser Murray Weatherston said advisers could not tell their clients to take any action.  “It’s too late. You’ve got to figure out what the long-term impact will be. I don’t think [today] is the day to risk off and sell out because the market has gone down. The day to sell was [Monday].”

He said it was possible the Trump win could be a catalyst for reassessing what people considered value in an overstretched bond, equity and property market.

IFA chief executive Fred Dodds said advisers would need to look back at other similar situations in the past and remind clients that this sort of upheaval had happened before.

“It’s all about time in not timing,” he said. “If they sell now, they crystallise the loss. All these stories they haven’t had to tell for five or six years they will have to dig out of their bottom drawer.”

Tags: financial advisers

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