Trying times: Coping with volatility

To call this month’s markets “volatile” is a bit of an understatement — a 600-point freefall, followed by a 500-point gain, is enough to make even your best trained client a little queasy.

Too often Canadians are distracted by short-term market movements, as the mainstream press runs screaming headlines. It may be time to remind clients that when it comes to investing, the long view tends to be best. Check out the customizable template letter To Clients: Staying invested long-term.

If your clients are considering bailing out of their investments, it may be time to revisit their risk tolerance profile. After all, it’s easy to embrace risk when everything is rising, but with markets only in “correction” territory, nervous investors might not be as brave as they once thought. Click here to read Turbulence shakes up risk assessments.

Aggressive strategies and your own risk tolerance Aggressive strategies are not always detrimental when constructing an investment portfolio. The problem is most investors are unsure of what it means to have an aggressive investment strategy. How does this investment style impact returns, and when should an aggressive investment strategy be adopted? Moreover, if you are an aggressive (or conservative) advisor, how can this affect the advice you give?

Talking to Clients: Four questions they should ask Do you have a lot of one-way discussions with your clients? Smart investors should ask questions, regardless of whether or not they are particularly knowledgeable about the markets. Some, though, might require a little bit of encouragement. Use this template letter to let your clients know that you value their patronage and that you welcome their questions.

Beyond KYC Risk may be a four-letter word but not necessarily the word you think. Francis D’Andrade, for instance, considers risk to be a g-o-o-d thing. “Risk is what creates the return,” explains the Markham, Ont.-based RGI Financial advisor. “If you don’t want any risk, you get a very low return. If you want a higher return, you need to embrace risk. So it’s good to a certain extent, but that extent is different for everyone.”

To Clients: RRSP contributions At this time of year, many Canadians are thinking about topping up their RRSPs, but with triple-digit swings in the equity markets, they may need to be reminded that it is an important part of their overall retirement plan. For a customizable template letter, click here.

KYC: Links and resources from Advisor.ca There are a number of links, resources, tools and templates available for you to download from Advisor.ca. Whether you’re looking for additional fact-finding questions to ask your clients, template Investment Policy Statements, appointment checklists or news and insight into the KYC requirements, we’ve got you covered.

From ADVISOR’S EDGE

Take it back How should an advisor unwind an inappropriate investment for a client?

Mixed emotions Having trouble understanding your client’s erratic investment patterns? You’re not alone. Look to behavioural finance for some answers.

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What do you think? Let us know by sending your letters to feedback@advisor.ca.

(01/28/08)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.