Addressing often-hidden emotional concerns clients may have is essential during periods of market volatility. On an intellectual level, most investors realize that difficult markets will pass and lead to new bull market upswings. Yet many individuals become fearful in the face of sharp declines. It’s hard to reason the fear away. Whether or not you think people should be scared is immaterial. They are scared, and you have to deal with it.

Handholding Rule #1: Be Proactive.
Don’t wait for clients to run screaming into your office. During tumultuous times, assume clients are a little frightened whenever you speak with them, and reach out with calming reassurance. I hate scripts, but this might be the way to begin a handholding conversation

“George, I know you’ve been watching these markets and they are pretty wild. I’ve had a few clients tell me they were a little concerned. They’ve been asking me if I thought things will get worse. So I just wanted to reassure you that we are just going through a normal market cycle and there is nothing hiding under the bed. I think we understand all the forces that are moving these markets right now and, while the storm isn’t over yet, this is not the time to panic. How are you feeling by the way? Any concerns I should know about? Has anything changed in your long-term goals?”

There’s no need to be hyperbolic or make any guarantees. The present storm may be raging for a few months. So you don’t want to make unrealistic predictions. But you know that the market looks out six to 12 months in advance. It is a future-pricing mechanism and it will often bottom and turn around just when things look their darkest and panic is the prevailing emotion.

Remember, you are basically dealing with emotions. It’s unwise to try to overcome fears with excessive use of facts, statistics, or detailed analysis. It’s almost as if you’re reassuring a frightened child.

“Rachel, there is no dragon under your bed. Dragons are animated fantasy characters drawn on computer workstations. They do not exist in real life. No creature can breathe fire because there is no gland or natural organ that can secrete a petro-chemical or flammable substance under high pressure. It’s just impossible bio-chemically! Do you feel better? Now go to sleep.”

Hand-holding Rule #2: Have A Hand Available!

I saw a very scary movie 35 years ago called The Exorcist. (It was actually the last scary movie I’ll ever see because it kept me awake for three straight nights!) At the movie, I saw something happen in the row in front of me that has stayed with me till this day.

Right in front of me was a woman and a young boy, maybe 10 or 11 years old. There was no movie-rating system back then and she probably thought it was safe to take her child to the movie. I’m not faulting her for that. But during a very scary scene, I saw the child reach out to hold his mother’s hand, and there was no hand to hold! Her hands were covering her own eyes. She was obviously terrified! The boy looked over at her and in a split-second his fear level jumped noticeably. He leapt from his seat and into her lap! It was a sad episode to observe. I felt for this little boy.

How’s this related to our world?

When a client reaches out to you, you have to be there! And you must come across as calm, controlled, and in-command. If you are scared yourself, the client will pick up on that and it will magnify his fear.

Go back to that scenario with the frightened child who can’t sleep. You couldn’t run into the child’s room screaming, “A dragon! Oh my God, there’s a dragon under your bed! Run for your life!”

So before you try holding hands, make certain you are on firm emotional ground. If you’re not, talk to someone who has seen this all before. Find a mentor or another advisor who lived through the Crash of 1987.

You want to talk about market volatility? Try a 22% train wreck in a single day. Five hundred points! My pulse doesn’t even pick up for anything less than two or three thousand now! If that’s not calming enough for you, dig up a relic who remembers 1973-74, when 50% of the brokers were purged from the industry!

Developing a historical perspective can give you a tremendous amount of confidence in the face of seeming uncertainty. You come to realize that there has always been uncertainty and market confusion. Severe shocks, extreme fluctuations, and exogenous calamities are not new. Nick Murray calls this phenomenon “The Apocalypse d’jour.” Yet somehow we’ve always come through okay. The markets just keep going up because they are ultimately a reflection and a gauge of the human spirit.

The time to truly panic is when you believe we’re undergoing a massive shift in human nature to something dark and demonic. So barring an alien invasion or takeover by the Taliban, I’m still bullish on human nature—at least the next 18 months!