Q&A  

Advisers face rollercoaster of volatility

Advisers face rollercoaster of volatility

How one advice business is managing existing and new clients, despite the Covid-19 crisis.

How is the current crisis disrupting you and your business?

Timescales of providers — trying to get information from them — have gone through the roof, but you can expect that at the moment, with people off work sick or working from home.

On top of that, this will inevitably lead to a loss of business throughout the industry, as confidence reduces. Equally, some investors who are a bit more bullish may say it’s a good time to get into markets. 

Have you ever experienced anything like this before?

I was around in 2008 during the financial crash and in 2016 when the UK voted for Brexit, so, yes, we’ve seen things like this before, although not this bad.

Personally, I don’t think you can liken this to 2008, because that was systemic risk in the financial system. This isn’t — it’s a black swan that has come completely out of the blue. 

I think the only thing you can compare this to is 9/11, which was terrible.

And I think the coronavirus has spooked people more because of the greater human cost and impact. 

On top of that, many are having to self-isolate. I think the biggest question worrying markets right now is, ‘How long is this going to go on for?’ — particularly as so many businesses are having to close so suddenly. 

I look at the VIX market volatility index and the higher it is, the more worrying it is.

If you look at the past month, on March 16 the VIX reached a high of 82.7, which is phenomenal. A year ago, it was 14.

But by March 24 it was back down to 55.5, so it is coming down a little and it’s positive when you speak to fund managers and they say, ‘Yes, we are seeing opportunities again and we are starting to reinvest into equities’. If that is the case, we can start to feel more positive.

What conversations have you been having with your clients, worried about their portfolios?

We’re seeing pretty significant losses, even in quite low risk portfolios. 

There’s no point avoiding client phone calls. It’s about reiterating messages and revisiting client objectives.

This is about medium to long-term investment and markets will recover. We don’t know when that will be, but historically they do. 

Clients who are most worried right now are people in drawdown taking income from their portfolio.

For people in that situation, it might be a case of looking at it again and having a conversation saying, ‘You might want to readjust expectations of the level of income you want to take from your portfolio’.

But overall, people realise the situation we are in. I think they want to pick the phone up and hear your voice saying, ‘Look, don’t do anything. The best thing is to just hold steady. Let’s not sell out — that’s the worst thing we can do’.