Recent market events have been jarring. The S&P 500 dropped nearly 5% in a single day, and major indexes posted their worst performance since 2020.
Tariff announcements, inflation concerns and broader economic uncertainties have all contributed to this current market volatility. As financial advisors, we need effective strategies to guide clients through these turbulent times while maintaining their confidence in long-term planning.
So, how do you deal with market volatility?
I recently spoke with Dr. Apollo Lupescu of Dimensional Fund Advisors on “The Bucket Plan® On Demand” podcast. We uncovered three critical strategies that can help transform market turbulence into client confidence.
Let’s delve into what we discussed.
1. Proactively Communicate With and Educate Clients
The best advisors don’t wait for clients to call – they reach out first during market downturns. My business partner Jason L. Smith, founder and CEO of C2P and JL Smith Holistic Wealth Management, puts it perfectly in another The Bucket Plan On-Demand episode:
“This is what differentiates the true elite wealth managers — they’re proactive versus reactive.”
Effective communication during volatility includes definite strategies:
- Personal outreach. In our practice, we’ve seen tremendous success when advisors personally call their significant client relationships during volatile periods. These aren’t panic calls — they’re reassurance check-ins.
- Educational content. Provide clients with clear explanations about market dynamics, including how tariffs work and their potential impact. When Apollo and I discussed tariffs, he explained they typically create a one-time price adjustment rather than sustained inflation. Research shows that when washing machines received a 20% tariff in 2018, about 12% of that cost passed to consumers. Producers and retailers absorbed the remainder.
- Focus on facts, not politics. When creating client communications, remember that market perspectives often align with political viewpoints. Stay focused on fact-based analysis rather than commentary that might alienate portions of your client base.
[Related: Acquiring Clients Through Authentic Marketing: 4-Step Growth Guide for Financial Advisors]
2. Share Historical Context To Build Market Perspective
Historical perspective is one of our most powerful tools for calming client fears. It’s important to emphasize that since 1926, only 12 calendar years have seen market losses exceeding 10%. Major 20% to 40% downturns typically result from unpredictable “Black Swan” events rather than telegraphed policy changes.
Share these key historical insights:
- Market efficiency and tariffs. Markets efficiently incorporate information and expectations about policy changes, including tariffs and market volatility impacts. As Apollo explained during our podcast, tariff announcements typically create short-term volatility. However, their actual economic impact is often already priced in before implementation. This explains why reactive trading based solely on headlines frequently underperforms.
- Recovery patterns. Even significant events like the 2020 pandemic, which caused a 30% market drop, resulted in the market ending that year up 18%. This demonstrates the importance of time horizon.
- Rolling returns. Shift client focus from day-to-day volatility to rolling 12-month returns. Over the past decade, these have averaged approximately 13%, even accounting for periods of volatility.
Apollo emphasized that looking at longer time frames provides crucial perspective. While the market might be down a few percentage points year-to-date, it’s typically up significantly on a rolling 12-month basis.
[Related: How Financial Advisors Can Simplify Asset Allocation for Clients]
3. Use The Bucket Plan Framework for Client Confidence
Using a structured, time-segmented approach like The Bucket Plan can make complex market conversations feel more manageable and reassuring.
How To Talk to Clients About Market Volatility Without Sparking Fear
Arguably, The Bucket Plan® framework is the most powerful tool in our communications arsenal during market volatility. This time-segmented approach provides a clear structure that helps clients understand why they have protection despite market fluctuations. That’s especially true if they’re worried about protecting their retirement income.
The three-bucket approach provides a trusted framework:
- Direct security (Now Bucket). When clients express concern about covering expenses during downturns, remind them of their Now Bucket (0-2 years). It should contain enough cash to fund immediate needs, shielding them from having to sell investments during volatility.
- Buffer zone (Soon Bucket). The Soon Bucket (3-9 years) creates a crucial time buffer of conservatively invested assets. Those allows growth investments years to recover before anyone taps them for income.
- Long-term perspective (Later Bucket). The Later Bucket (10+ years) is designed for growth — and it expects volatility, although uncomfortable. The time horizon allows these investments to weather volatility and potentially benefit from recovery.
Why Implement The Bucket Plan Strategy?
Smith shared his “aha moment” about The Bucket Plan strategy during the 2000-2001 market correction. Clients with properly funded Now and Soon buckets remained calm during significant volatility, while those without this structure experienced tremendous stress.
This three-bucket retirement plan approach is so effective because it directly addresses sequence of returns risk. That risk remains one of the greatest threats to retirement security during market downturns.
By protecting retirement income in the Now and Soon buckets, clients can maintain their lifestyle while giving growth assets time to recover. This significantly reduces the psychological pressure to make emotional decisions during market volatility.
The Bucket Plan also helps identify opportunities during volatility, including Roth conversions at lower valuations, disciplined rebalancing and tax-loss harvesting. It positions you as a proactive advisor rather than just a portfolio manager.
[Related: Financial Planning Simplified: Designing Your Client’s Bucket Plan]
Download our free guide on The Bucket Plan Best Interest Process.
How C2P Supports You During Market Volatility
At C2P, we’re committed to helping you thrive in all market conditions. Whether you’re navigating current volatility or building a more resilient practice for the future, we offer comprehensive resources to support your growth:
- The Bucket Plan Training. Master our proven time-segmented planning approach through our Bucket Plan 1.0 training program. It equips you with both the technical knowledge and client communication strategies to implement this powerful framework.
- Timely Communication and Content. Access turnkey client emails, presentation templates and social media content. We design these specifically to educate and reassure your clients in turbulent markets.
- Practice Management Resources. From client acquisition to team building, our systems help you develop a sustainable and scalable advisory business.
- Holistic Planning Tools: Expand your service offerings beyond investment management with our five-pillar approach to holistic wealth management.
Ready to build a more resilient practice? Our Bucket Plan 1.0 training program provides you with the framework, tools and communication strategies necessary to transform client conversations during volatile markets.
Schedule a consultation to learn how our comprehensive advisor solutions can transform your practice during uncertainty.
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The Bucket Plan On-Demand Podcast
Hear from industry specialists like Dr. Apollo Lupescu on investment strategies, client communication techniques and practical applications of The Bucket Plan methodology. Recent episodes cover market volatility strategies, tax-efficient planning and client confidence in uncertain times.
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For Financial Professional Use Only
The information provided in this presentation is not intended as investment advice or legal advice. The information provided is for informational and training purposes only. The information in this presentation was accurate as of the time the material was created. Tax laws and rulings can frequently change. Please discuss the client’s current situation with an accountant or tax advisor.