The upcoming elections have heated up poitical tensions in the U.S., but it would be a mistake to let the turmoil influence clients' decisions about their investments and financial plans, advisors say.
“Ideally my goal is to reassure them that financial markets, for the most part, do move independently of politics and I know a lot of people tend to confuse them a lot,” said Andrew Fincher, a financial advisor at VLP Financial Advisors of Vienna, Va.
The contentious elections could cause some clients to make investment decisions based on fear, said Spuds Powell, managing director at Los Angeles-based Kayne Anderson Rudnick.
“Given that, in my opinion, there’s more political divisiveness and animosity in America today than I can recall ever, I think the likelihood that investors make the mistake of letting their fears influence their judgment in terms of investment decisions is probably quite a bit higher in this environment than it's been in previous election years,” he said.
Ironically, the results of an election tend not to have a dramatic impact on the economy, he said. In fact, most election years, regardless of the outcome, the economy does well. In addition, a good company is still going to be a good company regardless of who sits in the White House, Powell explained.
“It’s very very rare that a really excellent company becomes a lousy company overnight just because of the outcome of an election or vice versa,” he said. “A new president doesn’t turn a lousy business into a great business.”
Michael Hansen, co-founder and managing partner at Walnut Creek, Calif.-based Frontier Wealth Strategies, tells his clients that it does not matter which party controls which branch of government. Neither side wants the economy to fail.
“At the end of the day, all politicians want the economy to be strong because that serves their purpose of being re-elected,” he said. “It’s really hard to get re-elected if the economy is bad.”
Kim Abmeyer, founder and wealth advisor with Dallas-based Abmeyer Wealth Management, an affiliate of ORG Partners, doesn’t talk politics with her clients. She chooses not to engage in those conversations when her more outspoken clients try to bring them up.
“My role as their advisor is not to justify their own position or my own position, it’s how can we look at the environment that we’re in and maximize our investment potential with what we believe,” she said.
Advisors also say it's important to maintain a neutral stance with clients when it comes to politics.
“When I’m working with clients, I am politically agnostic,” Fincher said.
If advisors inject their political opinions into a conversation, they risk alienating a significant portion of their client base, said Powell.
“If you as a wealth advisor take strong political points of view on issues on either side of the ledger, there’s real risk you’re going to lose clients and certainly your ability to grow your practice will be hindered,” he said. “I think that will be a major mistake and a very unprofessional way to consider yourself as a wealth advisor.”
The relationship between an advisor and a client must depend on trust to get past any political fear and confusion, Powell pointed out. If the two have trust, that will help them wade through our current political climate.
“If you can help clients use good judgement and avoid letting fear and greed motivate them to make decisions that they wind up regretting, that’s critically important,” he said. “That’s how you retain clients and that’s how you motivate existing clients to increase the size of their investment with you.”