Strategies for Advisors to Help Calm Client Nerves When Recommending Equity Investments

Posted on September 20th, 2018 at 2:32 PM
Strategies for Advisors to Help Calm Client Nerves When Recommending Equity Investments

From the Desk of Jim Eccleston at Eccleston Law LLC:

A recent article written by Craig Israelsen and appearing in Financial Planning magazine sheds light on an issue that often confronts advisers.


It is inevitable that advisors have certain clients who have a high percentage of their portfolio in cash because they are reluctant to purchase equity investments. This caution likely stems from the market meltdown during the 2008 financial crisis. Even though these fears are understandable, clients typically cannot hold onto cash their entire lives unless they are extremely wealthy.

Therefore, advisors must let their clients know that since 2009, both large-cap U.S. stocks and small-cap U.S. stocks have produced positive annual returns 80% of the time. However, these advisors must also assert to their clients that there is a chance that they could enter the equity market immediately before a correction or even a crash.

One solution to limit the fear of bad-investment-timing is to help clients ease into equity investments. Easing into equity investments means that clients would make regular contributions either annually, quarterly, or monthly over a period of time. This is beneficial because systemic investing reduces the risks associated with market downturns, whereas lump-sum investments are initially fully exposed to timing risks.

In addition, advisors can suggest to clients that they diversify their assets to avoid a poor performance from one asset class bringing down their entire portfolios. This can be avoided by investing in certain mutual funds that are fund-of-funds, which are essentially diversified across several asset classes. These mutual funds use a market capitalization weighted approach rather than, for instance, a fund that has 100% exposure to large-cap U.S. stocks.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today. 

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston, SEC, equity investments

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Thank you for your professional assistance with this matter. You are very good at what you do.

John T.


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