Concerned couple meeting with advisor / CourtneyK

This article appears in the December 2022 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

It’s gritty, not glamourous, but volatile markets are when financial advisors can really prove their worth. Helping clients navigate the storm will pay off more than any hot stock tip or shrewd tax strategy.

The annus horribilis for investors is coming to a close with stock markets around the world down, in some cases heavily (the Nasdaq dropped by 28% for the year to Nov. 30). The S&P/TSX composite index has held up better than most, with energy stocks benefiting from soaring commodity prices, but most other index components are down for the year (the tech and healthcare sectors by more than 50%).

Given soaring inflation, rising interest rates, geopolitical strife, climate chaos and crypto calamity, there have been few places for investors to take shelter in the past year.

And things are unlikely to take a turn for the better anytime soon. As the slow-moving effects of tighter monetary policy work their way through the economy, dulling growth and dimming labour-market prospects, expect more pain ahead. For many households, finances will come under greater pressure as mortgages reprice and home equity continues to slide. All too often these dark periods are met with despair, which can prove ruinous by impairing investors’ judgment and undermining sound action.

That’s where advisors come in. By helping clients cope with financial stress, providing them with strategies for dealing with mounting expenses and rising borrowing costs, and maybe even sniffing out stable returns, advisors can deliver genuine value at a time when hunkering down and riding out the storm is more tempting.

Coming on the heels of a period of exceptionally easy money, where illusory fortunes were made and now lost, guiding clients through choppy financial waters may seem boring by comparison. But advisors should seize an opportunity to prove their worth once and for all — not only to their clients, but also to themselves.