Coaching Clients Off the Sidelines

Share This

The past few years have been a market watcher’s dream. The 2016 election, Brexit and recession fears sent stocks pin-balling to impressive extremes both high and low. But from your clients’ perspectives, these gyrations may have been sweat-inducing enough to send them straight to safer assets, like cash.

It’s an age-old story: Every good advisor knows that participating in the market can be an essential part of helping clients meet their goals for growth and income. Yet, you also know how clients can get spooked by market volatility. Their desire to feel safe from risk can entice them into making decisions based on emotions. In fact, clients are holding $13.4 trillion dollars of cash on the sidelines today – up 5.5% year over year.1

So how can you cut through your clients’ internal monologue, the one that’s preventing them from stepping into the market, and help them balance risk and reward? Here are some best tips for helping them bring their fears out into the light and test them against the facts.

Have an honest huddle about retirement risks

Clients who hold a great deal of cash like the feeling of security they get from seeing a certain balance in their bank account. Yet it’s worth helping them remember the adage that it’s the risks you don’t plan for that may get you in trouble. With clients living longer and fixed income providing lower returns, the old standby of the 4% retirement withdrawal rule may no longer hold up.2

Clients may need help seeing that if they aren’t making the most of the lower-risk assets in their portfolios, they may not be for rising healthcare costs and other unexpected retirement expenses.

Your suggestion: Help them explore how fixed annuities may serve as alternatives to the lower returns of fixed income vehicles, as well as cash holdings, with solutions that may also help protect their investments from .

Review potential growth opportunities

Clients also need to realize that holding onto cash can prevent them from moving forward on the march toward their retirement income goals. Over time, taxes and rising inflation can decrease assets and buying power. As a result, the same amount of cash may make clients feel less emotionally secure each year. Of course, they’re not alone in fearing market losses, especially as they approach retirement: 80% of Americans think it’s especially important for people over age 50 to have a strategy to protect against investment loss.Yet you can show them options that may fit with their need for certainty and protection.

Your suggestion: Help them explore how guaranteed income and growth potential can in a variable annuity.

Show them why to get on the field

You know that market timing hurts, but clients may need to see the proof. It can be easy to second-guess exactly when to enter the market, but strategies like may help clients ease in. And over the long run, one of the best market strategies is to be patient.

It pays to stay invested

Over the long term, emotional investing and market timing can lead to underperformance. Compare the average investor returns to that of the S&P 500 over the 20 years from 1996 to 2015.

Source: DALBAR, Inc. Quantitative Analysis of Investor Behavior, 2016.

Average equity investor performance results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: Total investor return rate and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions and exchanges for each period. The S&P 500 Index is a price index and does not reflect dividends paid on the underlying stocks. It is not possible to invest directly in an index.

Do you know a client who needs help overcoming their fears and engaging in the market? Start the conversation today. Contact your Lincoln representative to get help moving them off the sidelines. And don’t forget to follow us on and  for regular insights and tips on income planning conversations.

1Federal Reserve, St. Louis Fed. Guide to the Markets – U.S. Data as of April 30, 2017.
2David Blanchett, Michael Fink and Wade Pfau. “Low Bond Yields and Safe Portfolio Withdrawal Rates.” Morningstar, January 21, 2013.
3Greenwald and Associates, Guaranteed Lifetime Income Study, 2016.
All investments come with the risk of losing money, including possible loss of the capital.

The views expressed in the referenced article are those of the author only and not necessarily those of any Lincoln Financial Group® affiliate. Neither the information, nor any opinion expressed herein shall be construed as a recommendation to buy, or as an offer to sell, any securities or insurance product, a forecast of future events, a guarantee of future results or investment advice.

Lincoln Financial Group is the marketing name for Lincoln National Corporation and insurance company affiliates, including The Lincoln National Life Insurance Company, Fort Wayne, IN, and in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY.

Share This
No Comments

Leave a Reply