Addressing client uncertainties in a most unusual election year

Putnam Investments, 10/19/20


Every four years, investors face uncertainty as a presidential election nears. This most unusual of elections is taking place amid a backdrop of unprecedented uncertainty: an ongoing global pandemic and recession at home, an electorate more polarized and energized than ever, and an election outcome that may not be immediately clear.

Whatever political side your clients are on, they have likely heard doomsday predictions about what will happen if the other side wins, and they are certain to have questions about their specific financial outlook.

As politics and emotions run high, it’s important to address client concerns with data to counter the steady stream of conjecture and ideology.

How do you help address investor fears and prepare them for the election outcome — whatever that outcome might be? Following are four tips for addressing client uncertainties around the election and its aftermath, as well as a look at how FundVisualizer can help guide your discussions.

FundVisualizer helps you focus on facts as you address important client questions about where they are invested; what their exposures are to various markets, industries, or geographies; and how they have performed through previous election cycles.

TIPS FOR ADDRESSING INVESTOR UNCERTAINTIES

1.Don’t let fears and emotions drive rash decisions
Election rhetoric highlights the economic problems facing the country, and tends to amplify a message of gloom and doom about what will happen if the other side wins. As emotions run high, investors may be tempted to make big changes in investment strategy in anticipation of what they are picturing as the worst-case scenario.

This might be a good time to have a discussion with clients about risk tolerance. Use FundVisualizer’s Asset Allocation, Sector, and Top Holdings charts to guide your discussion about current exposures and risks, as well as any potential adjustments that might be appropriate.

FundVisualizer -- Asset allocation chart

Try it in FundVisualizer: To compare asset allocation, click here, add 2 or more funds, and click the "Create" button.

2. Remember the big picture
The economic effects of elections tend to play out over time. History shows that regardless of which party wins the election, the stock market has been remarkably resilient throughout its history. It has recovered from short-term events of all kinds to move higher over the long term. It is important to remind nervous investors that market timing rarely pays off. Using current events to predict the market and make decisions about buying and selling can mean missing the market’s biggest gains.

Demonstrate the long-term trajectory of your client’s investments — including specific market ups and downs — using FundVisualizer’s Mountain Chart.

3. Understand how investments have weathered past elections
Taking a detailed look at a client’s portfolio, including their exposure to specific types of investments that they might find concerning in light of current conditions, can be a good way to put their concerns in context.

Use FundVisualizer’s portfolio modeling feature to see the blended risk characteristics of a portfolio through previous election cycles, as well as other economic ups and downs. The Asset Allocation and Sector charts can provide insight into a portfolio’s exposure through their respective data points. Or use the Top Holdings chart to see a portfolio’s exposure to specific underlying holdings that may be of concern.

FundVisualizer -- Asset allocation chart

Try it in FundVisualizer: To model a portfolio, click here, add 2 or more funds, click the "Portfolios" tab and click the "Create" button.

4. Keep calm and focus on goals
In an environment focused on the here and now, it is important to direct the client discussion back to the real goals of investing: What is the long-term picture of what you are investing for? How far into your goal are you? How many years are you from your goal?

A bigger picture discussion helps put concerns driven by the day’s headlines in context, and serves as a reminder that while elections come and go, investing remains a long-term proposition.

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