Stress-test financial plans to ease client anxieties

Financial advisors can help alleviate client anxieties about economic volatility by stress-testing financial plans and showing clients the results.

Clients who understand that markets can fall, and that inflation and borrowing rates can rise, will be “less surprised and concerned by it if it’s [factored] in your plan,” said Christine Van Cauwenberghe, head of financial planning with IG Wealth Management.

“If you’ve tested those numbers and your plan still works, you’ll have a lot more confidence than sort of randomly putting away a certain amount every month.”

According to a study released Thursday, one-third (31%) of Canadians who do not work with a financial advisor said they were worried about their finances. In contrast, about one-sixth (16%) of those who work with advisors said the same thing. The survey was conducted in a partnership between IG Wealth Management and Pollara Strategic Insights.

In periods of uncertainty, it’s important that financial advisors step up their efforts to reach out to clients about their concerns, Van Cauwenberghe said. “If you really want strong relationships with your clients, you need proactive communications, getting to know your clients, and being there for them when the chips are down.”

The turmoil of the last several years — a global pandemic and lockdown, significant market volatility, as well as geopolitical tension and rising inflation — has made it easier to have conversations with clients about unexpected but high risk events, Van Cauwenberghe said. Clients have a better understanding today of the need for a comprehensive financial plan.

“Risk protection has always been something we wanted to talk to clients about, but a lot clients either weren’t open to it or don’t want to talk about those things,” she said. “It’s not even just about investments, it’s ‘Do you have sufficient insurance?’ because life doesn’t always work out the way we planned.”

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.