Be an advisor, not an order taker: 3 things to tell clients who become tempted by short-term market trends

By Dave Scranton

Advisors Academy


When the market is up with any degree of consistency, as it has been, it’s easy and understandable for clients to start mistaking short-term cyclical market cycles for something more permanent.

More often than not, most of us would probably be insulted if we were called “dull, boring” and “old-fashioned.” That’s understandable, but when it comes to the kind of conservative investment tools I specialize in as a financial advisor, I not only don’t mind being considered, dull, boring and old-fashioned, I’m actually proud to proclaim it.

What can be challenging for some advisors, though, is maintaining that pride and commitment to a conservative business model during times when your clients are clamoring for a change based on short-term market trends. When the market is up with any degree of consistency, as it has been, it’s easy and understandable for clients to start mistaking short-term cyclical market cycles for something more permanent.

When that happens, and clients start telling you they’re ready to move away from “dull, boring and old-fashioned” and back into the flashier, sexier world of stocks, it may be tempting for some advisors to simply relent and take the path of least resistance. In other words, they become order takers, because that’s so much easier than re-educating their clients about the lessons of stock market history, and the differences between cyclical and long-term secular market trends.

Right now, we’re seeing the market do some things that could easily lead some advisors right into the order taker trap. On the Tuesday before Independence Day, the S&P 500 Index reached a two-month high, spurred by some rare good news about factory orders and speculation that central banks around the globe will be taking strides to help stimulate economic growth.

That’s all well and good, but the important thing to remember, and to make sure your clients understand, is that the market overall is still down from where it was in 2000 when our current secular bear market cycle began. Beyond that, here are three other important facts to impress upon your clients when they become tempted by short-term market trends and start looking to you to simply take their order:

1. History shows that our current secular bear cycle still has probably another 8-to-10 years left to play out, during which time the market will likely deliver zero net growth.

2. Every secular bear market cycle throughout history has seen at least three or more major market drops, and our current one has experienced only two so far. What are the odds this will be the first secular bear cycle to buck 200 years of market history? Very slim, is the answer.

3. While steadfast buy-and-hold investors are still waiting for the market to get back to its pre-2000 highs, “dull, boring and old-fashioned” instruments like annuities and certain bonds have been consistently generating reasonable returns in the 4 percent to 5 percent range over all that time.
You might also remind your clients that investing is never purely a numbers game, and that their logical urge to “strike while the iron is hot” is part of the emotional element that makes investing simple but not easy. While the concept of “buy low sell high” seems simple enough, investors who make decisions based on emotion rather than a thorough understanding of long- and short-term market trends usually end up doing exactly the opposite.

There’s no denying that the market has seen some healthy jumps recently, and there’s no doubt your clients are aware of it. But it’s important to recognize that these are times of temptation, and, thus, the time when it’s most important to have the courage of your convictions. Now more than ever, be proud of your “dull, boring and old fashioned” business model and the security and consistency it provides.

Most importantly, take the time and effort to re-educate your clients about the realities of long-term secular market cycles. Embrace more than ever your role as advisor, and resist the urge to ever become an order taker.​