Financial Advisors

30 yr old client wants to move to a cash position bc we’ve lost what he deems too be too much this year. I’m new so my first real conversation like this. How do you approach it? What would you say?

likeuplifting
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He still owns the same number of shares, they've just experienced a temporary decline in value. Ask him when the best time to buy a new winter coat is. Is it in november right before winter? Or in july when no one is buying them? Supply and demand 101. If he sells now he is selling low. If gas is cheap and his car is half full, does he take advantage of the temporary decline in gas price and fill up? The stories and analogies are endless. Just gotta find a way to relate to him and describe it that way

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My one question for the client is simply to ask what he/she is paying you for? Answer: For your Advice. If they’re not listening to your advice and we’ve experienced a 2-3 month correction in the market, imagine once the actual recession begin. If you lose their account with our current volatility (a 10-15% correction in the S&P that’s overdue), imagine if a 20-30%+ downturn occurs. They’ll be a nightmare. You need to lay the ground work... Do you know how to calculate CAPM or to tell a client in layman’s terms what standard deviation equates to with their investment strategy? Good luck

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He has not lost anything, but he will if he makes that move. The stock market is a systematic transfer of wealth from the impatient to the patient investor. Make sure to stay on the receiving end of that transfer!

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When the market is down, it is usually triggered by some bad news...however, it should be a buy signal...definitely do not sell...you will only be guaranteeing a loss.

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I would just save yourself the trouble and tell him to make sure the cash heads to another firm

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likefunnysmartuplifting
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Then call him first.

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Something I heard earlier today: Market down turns are always temporary, unless you make it permanent.

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likehelpfuluplifting
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I love this!!! Thank you.

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When you go into cash, you have to be right twice: once when you take your money out, and once again when you put your money back into the market. I would ask him what his strategy is for when to put his money back in.

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likeuplifting
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Be fearful when people are greedy and be greedy when people are fearful- Warren Buffett.

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likehelpful
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Ask him if he’s bought anything from Amazon in the last month? Clicked on anything in Google? Been on FB? Paid his T or VZ cell phone bill? Filled up his tank with CVX or Arco? Then ask him if he thinks any of his neighbors might have? Then let him know he still owns all those companies in his portfolio and their still making money.

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Legg Mason has a great piece called “Leesons from time” or something close to that you can google it. I’m a nutshell it has Time magazine covers back 75 years or so and it’s the same thing over and over about the economy, crisis, recession etc. and it shows the market over that same time and how it rebounds and continues to grow. You should check it out

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likesmart
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Show him the S&P in the 2008 and then 2009.

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I keep hearing about nick Murray. I need to add his books to my long list of books i want to read!

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Thank you all! Had the conversation and it wasn’t too bad. I used several of the one-liners and advice suggested by you all. He’s just watching the daily market fluctuations and it’s driving him crazy. Told him he can’t be doing that bc he’s constantly going to be Unhappy and that we are in this for the long haul.

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Tell your client Downturns are normal, upturns always follow downturns and upturns last much longer. Use first trust “history of bull and bear markets” to illustrate this point It also helps if you have the down market conversation before the down market happens to help manage client expectations Also turn their attention to their long term goals and off the short term fluctuations

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likesmart
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Find New Money, Dollar Cost Average, diversify and harvest!

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Not the move to make

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It seems like this client may not understand the power of dollar cost averaging. If he is only 30, the money he is yet to contribute is far more important than what he already has saved. A little education can go a long way. You may not need to have this conversation over and over again for the next 40 years if you help them understand the basics of investing now.

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Ask him when he intends to use that money. The bucket strategy is an important conversation. If he has a shortage in general savings, it could explain a lot.

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Advise him to stop watching the news about the markets. That only adds fuel to the fire of emotional decisions. If he has any other cash, nows the time to invest more. Slow and steady wins the race over the long run. Good luck and Happy Holidays!!

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Why not show him something? The client probably has no understanding of his risk and why he needs risk in his portfolio. Stress testing, risk analysis, cash flow analysis could help him/her visualize why you’ve allocated the client

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Some of the best days in history come right after large downturns.. you go to cash, not only do you lock in your losses but you also will probably miss out on all the games thereafter.

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Well...Clark capital moved to cash 9/30. Beacon liquidated equities Monday 12/17 at 9:30 am. Tell me their wrong🤷🏼‍♂️

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They are wrong. Timing the market consistently is impossible. Invest your long term (5 plus year money) in a mix of stocks and bonds that lines up with the return you need and the risk you are comfortable with. Keep your short term money out of stocks.

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