client meeting

Volatile markets this past week reflect a global financial system under pressure as banks in the U.S. and Europe struggle under the weight of rising interest rates. Amid the turmoil, some financial advisors seized the opportunity to have proactive conversations with clients, uncover their concerns, and buy cheap investments to get clients to their goals sooner.

Ngoc Day, a financial advisor with Macdonald, Shymko & Co. Ltd. in Vancouver, said she wasn’t concerned about contagion following the collapse of a couple U.S. regional banks, given the prompt action taken by the Federal Reserve.

Central bank support undergirds confidence and stops bank runs, Day said. (Whether bailouts are fair to taxpayers is another question, she added. The Associated Press reported that U.S. banks have borrowed nearly US$165 billion from the central bank this past week.)

And, while clients haven’t been calling her, Day has been on the horn anyway.

“Phone calls I’ve been doing this week are more proactive calls to clients,” she said. “It’s a good check-in point” to show clients you care and are on top of a developing situation. Some clients may avoid calling so that they don’t come across as unnecessarily nervous, she said.

Plus, the timing of the current banking crisis is tough given last year’s poor market performance. “Bonds have gone down, stocks have gone down,” she said. “It’s better for us to be proactive.”

Charles Provost, wealth advisor with the Vo-Dignard Provost Wealth Management Group at National Bank Financial Wealth Management in Montreal, also said it was positive that the U.S. government intervened so quickly to reassure markets.

Still, he said it’s difficult to predict how markets will respond over the next few weeks or months. A liquidity crunch could lead markets downward, but a pause from the Federal Reserve next week in response to the crisis could be positive for stocks.

“We’re monitoring the situation very closely and looking into the possible ripple effects it could have,” he said. In the meantime, his team has reassured clients that they didn’t have any direct exposure to Silicon Valley Bank.

Kathy McMillan, wealth advisor and investment advisor with McMillan Wealth Solutions, Richardson Wealth, in Calgary, recalled how “exhausting and depressing” the subprime mortgage meltdown was in 2008. At that time, advisors didn’t have guidance to go on — “kind of like the new turf we’re on now,” she said.

A few clients emailed this week to ask, “Am I OK?” she said.

Compared to 2008, Brad Brain, portfolio manager with Brad Brain Financial Planning and Aligned Capital Partners Inc. in Fort St. John, B.C., said he doesn’t perceive the current situation as “an exceptional risk,” though that can only be known in the long run.

“Whether this is the next big bad thing or not, we inevitably will get the next big bad thing,” he said, noting the tendency for media to sensationalize and catastrophize — though no worried clients called this week.

Add the collective experience of the past couple of years, and things get more complicated. Any woes are amplified by post-Covid exhaustion — everything from the market drop in March 2020 to travel hassles, illness, divorce and the Ukraine war, McMillan said. “We’re all irritable and this [latest situation] just adds to it,” she said.

Faced with challenges, clients may fixate on portfolio returns, McMillan said. But sometimes, the root issue is something else.

Personal problems — fear about not having enough money for essentials, paying for kids’ educations or supporting elderly family members — are often “the bigger story,” McMillan said.

Recently, a client, ostensibly worried about returns, opened up about relationship and work concerns when McMillan noticed some physical changes and asked how he was. (Such conversations have also been instructive for younger members of her team to observe and learn from.)

With a multigenerational book, McMillan provides the trifecta of financial planning, investment management and, especially for younger generations, financial literacy. She ensures clients are well-versed in her mantra: when things go bad, there is opportunity.

As a result, some of her younger clients are now excited to buy when there’s a market correction.

Retired clients, meanwhile, typically have one to three years of income set aside, so they’re prepared despite market movements, she said.

Brain said his clients’ portfolios haven’t been particularly volatile given their diversification and his value-style of investing. “We were never chasing the overpriced stuff to begin with,” he said.

Day noted that Silicon Valley Bank’s parent company was 0.03% of the MSCI All Country World Index, and U.S. regional banks are about 1%. She too cited diversification, including the use of diversified ETFs, as a reason clients don’t need to worry — something she reminds them about during phone calls. “They never have big exposure to a particular stock,” she said.

Brain also put money to work this week. As energy prices tanked, “I took that, as did many of my peers, as an opportunity to acquire more shares in wonderful businesses with compelling supply and demand stories at beautiful prices,” he said.

He talks with clients about market drawdowns beginning with their first meeting. “I’ve been constantly telling them we could see a downturn and that if it’s appropriate for your financial situation don’t fear that but rather let’s embrace it.”

Finally, proper financial planning is key for positive client outcomes.

“The ultimate objective of financial planning is identifying the client’s financial goals and objectives and making decisions that are consistent with them,” Brain said. “Through that, a good financial planner will build in resiliency. You can have a bad day and it’s not going to sink your plan.”

With files from Mark Burgess