The Emotional Recession Is Optional
In 2023, a complex macro backdrop challenged our economy, stirring fear and anxiety, and spurring an emotional recession. This presents unique challenges and opportunities for financial advisors to retain their clients’ trust and gain clients who are seeking new answers.
Yet as of Q3 2023, the financial recession has not hit. By the end of July, Federal Reserve Chair Jerome Powell stated he believes the United States will avoid the 2023 recession economists have predicted since 2022.
Regardless, the idea and threat of a recession (and the complex emotions that come along with it) have impacted many advisors, businesses, investors, and economists — some for better and others for worse.
Many advisors choose to batten down the hatches and temporarily avoid the risk of investing in their businesses. And others seize the opportunity the competition leaves behind.
While the reality of the macroeconomic environment is unavoidable, we firmly believe you don’t need to participate in a recession — mentally, emotionally, or even financially.
This article shares tips on what advisors can do to prevent their businesses from suffering in the face of an emotional recession and economic downturn. Instead, you can use it as an opportunity to advance your practice and help your clients gain traction on their financial objectives.
Don’t Compromise Your Practice in a Recession
The 2022–2023 stock market has been an emotional rollercoaster for many investors. Americans continue to navigate persistently high inflation, and the risk of nationwide and global recessions still looms on the 2024 horizon. Additionally, uncertain outlooks from economists have made it difficult for many to stay focused on long-term goals.
CNBC Chief Economist Dr. Marci Rossell defined the economic landscape earlier this year as an emotional recession where unfavorable market outlooks and individual factors such as inflation rates and gas prices trigger emotional responses that, in turn, impact market conditions.
During an emotional recession, fearful investors (and even advisors) often cheat themselves out of long-term wealth and business-building opportunities by making emotionally driven decisions.
One of the most important things we’re learning from the current economy (and every other challenging market over the past 200 years) is to maintain a long-term perspective and not base business decisions on short-sighted responses to every market dip.
When times are uncertain or seem to be getting tough, it’s natural to go into survival mode. This could lead you to cut back on investing in your business, hindering your growth and ability to reach your clients and prospects.
Look for Opportunities to Win New Clients
Instead of pulling back and participating in an emotional recession, we encourage you to reach out to your clients more. Not to sell, but to be a reassuring and stable presence in a sea of fear. Position yourself as an authority they can trust by regularly communicating with them (whether through newsletters or one on one). Give first and give freely.
Show you understand their fears and concerns, and preemptively provide answers to questions they might have given current economic pressures.
If you wait for them to come to you, you could miss the opportunity, and a more proactive advisor may win their trust first. (Though as we know, there will be other opportunities—don’t worry about the seeming competition.)
A 2023 survey of high-earning investors defines the top reasons clients leave their advisors in times of economic pressure:
You might think that clients fire their advisors because of poor performance during bear markets, but you’d be wrong. Research shows that lack of attention and poor service are what motivates clients to leave their advisors.
Savvy advisors understand that staying connected to clients and being highly visible to prospects is the secret to thriving during a recession or market crisis.
Whatever is going on in the economic landscape, you should use it to your advantage. Instead of hiding, openly talk about what’s going on in the economy with your clients and show how you can help them navigate it by inviting prosperity rather than fear.
If you can break through the sea of uncertainty your clients face in erratic markets by offering timely insight, you’ll quickly win new clients and build strong relationships with existing ones.
Introduce Whole Life Insurance as a Safe Wealth Builder
When market outlooks fluctuate, typical financial advice suddenly falls flat. Many people begin to second guess their strategy to dollar-cost average into the S&P — even if it’s worked for them over the past 20 years.
Clients who once questioned what they’d gain with a whole life insurance policy are suddenly open to listening. And concerns about low returns recede. That’s because certainty trumps potential in any economy, which is more apparent in an emotional recession.
Discerning advisors can quickly unveil the truth of stock market gambling amid recession fears. Whole life insurance stands out as a stellar low-risk option, which you can prove through visualizations with a whole life insurance calculator.
The calculator will help you shed light on your client’s financial future (regardless of market highs and lows) by walking them through almost any economic scenario. You’ll be able to show how whole life insurance can protect them from recession risks and keep them on track to meeting lifelong financial objectives. You can also use our calculators to compare whole life insurance IRR to other assets.
Advance Your Advisory Practice
Throughout the past few years, the daily headlines have had no shortage of recession predictions. Although it has quelled more recently, the outlook for 2024 is still uncertain. Advisors should use this time to have constructive conversations with clients.
When your clients become anxious or afraid, they’ll look for someone to turn to for information. If you’re willing to jump into the fray, you’ll find tough economic times are some of the best to advance your practice and guide your clients to make smart financial decisions with whole life insurance.
If you want hands-on training to grow your practice, attend Truth Training. You’ll learn straight from Todd how to help your clients avoid the emotional recession and make the most of their finances in any economic climate.