Clients are coming to conversations extremely well-informed, in comparison to other downturns, says one advisor.CESAR OKADA/iStockPhoto / Getty Images
Are you a professional financial advisor? Register for Globe Advisor and then sign up for the new weekly newsletter on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
The current market downturn isn’t the worst one in recent history – but it is one of the first to play out over social media, making investors instantly aware of every index decline, interest rate hike and inflation data point.
Advisors say that social media amplification has also kept these issues top of mind for clients, and has started to change the way clients engage with them.
The social networks play a significant role in Canadians’ lives. In 2018, 90 per cent of those aged 15 to 34, 80 per cent aged 35 to 49, and 60 per cent of those between the ages of 50 and 64 used social media regularly, according to Statistics Canada.
But these platforms are still relatively new and haven’t historically been where people went to find views on the market.
Social media giants Facebook, whose parent company is now Meta Platforms Inc., Reddit and Twitter Inc. were founded in 2004, 2005 and 2006, respectively. TikTok, where finfluencers and personal finance content now proliferate, was launched in 2014 as an app primarily for lip-synching videos before expanding to its current form.
“It’s hard not to have a headline come across your phone talking about inflation, real estate and the markets,” says David O’Leary, founder and principal at Kind Wealth in Toronto.
“I do think that’s partly driving the focus on inflation rather than on the fact that the markets are down so much.”
Melissa Caschera, investment advisor at BMO Nesbitt Burns Inc. in Windsor, Ont., says she’s been through multiple downturns with many of her long-term clients, but the current environment stands out for its comparison to the early 1980s recession.
“I find a lot of people are quoting things that happened in the ‘80s and how this is the worst inflation since [then], denoting what they know about the economy through social media,” she says.
Ms. Caschera notes she’s had some clients read back Facebook posts to her.
“I just try not to give it any legs and try to direct clients to safe resources to get their information through…clippings or email links from actual economists and strategists with something to say on the matter,” she says.
Paul Shelestowsky, senior wealth advisor at Meridian Credit Union in Niagara-on-the-Lake, Ont., says more clients are emailing him to share articles on market developments and get his take, something that he rarely experienced in the market downturns of 2020, 2015 and 2008.
“A lot of my clients are retired and they might not be on Facebook, but they’re online most days…and those headlines are everywhere,” he says. “The challenge is 99 per cent of the headlines are doom and gloom.”
Mr. Shelestowsky says clients are feeling “fatigued” from seeing week after week of “red in the markets.”
He thinks being inundated with headlines and posts has made this downturn feel worse to clients than the market crash in March 2020, which was a steeper decline but over much more quickly. In some ways, it feels even worse than the devastating 2008 recession, which has started to fade in their memories.
Social media has made clients ‘well-informed’
Darryl Brown, financial planner and founder of You&Yours Financial and director of portfolio strategies at Spring Planning Inc. in Toronto, believes social media has actually made clients more informed about what’s going on in the market. His clients’ top two concerns are what rising inflation means for day-to-day living, and how it impacts their investment selection.
“I think it’s interesting how the social media landscape really brought those two pieces in front of people and provided them with a whole lot of investor education,” he says.
“They’re coming to conversations extremely well-informed, in comparison to other downturns.”
He says his clients aren’t in the distant corners of social media, but noted it can be difficult for investors to find the right types of voices and information that are helpful for thinking about their portfolio. He’s told clients to consider social media personalities’ job and background, and why they’re active on these platforms before following.
Likewise, Mr. O’Leary says social media has led to a “high-level” awareness among clients of the global nature of inflation and the role that geopolitical tensions with Russia are playing in the current market volatility.
“People are maybe more aware that markets falling doesn’t have to do necessarily with their particular investment manager or Canada’s fiscal or monetary policy,” he says. “What’s going on in the market is driven by global factors more than local.”
How to cut through the noise
Advisors are taking different approaches to cutting through the social media noise and addressing clients’ concerns.
Mr. Shelestowsky says when clients are in for their financial and investment plan reviews, he’ll show them their plans with a hypothetical lower rate of return or a 3 per cent annual inflation expectation to demonstrate that they’re still on track to meet long-term financial goals.
“If we’re looking over the long-term, six months or even one year of negative returns should not derail that plan if it’s a good plan,” he says.
“I can say to them over and over that things will recover and they’ll be fine, but when you can show it to them, specifically, for their situation and plan, that’s where the peace of mind comes in.”
Ms. Caschera says conversations with clients have evolved as market information has become increasingly prevalent. She makes sure to draw on the distinction that their diversified portfolio will not perform exactly the same as stock markets or major indexes.
Mr. Brown says he’s been dispelling inflation myths and making sure clients understand that while inflation is running hot now, it won’t remain at these levels forever. He also talks through any possible implications for their portfolios but noted in the vast majority of cases, there’s no need to take action.
Meanwhile, when Mr. O’Leary begins a relationship with a new client, he spends time explaining to them that markets can be unpredictable, that they should expect periods of significant decline – especially after an exceedingly long bull run – and that volatility is an integral part of the relationship between risk and return.
He says those upfront conversations have paid dividends recently.
“If you’ve had those conversations and [then] the market tanks and you talk to them again and remind them, that holds a lot more credibility and weight,” he says.
“It doesn’t, to their minds, feel like you’re just making it up on the fly because things are going bad and now you’re trying to appease them.”
For more from Globe Advisor, visit our homepage.