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The current market downturn isn’t the worst in recent history — but it’s one of the first to circulate on social media, making investors instantly aware of every index dip, interest rate hike, and inflation data point.
Consultants say the amplification of social media has brought these issues to the fore of clients’ concerns, and is beginning to change the way clients interact with them.
Social networks play an important role in the lives of Canadians. In 2018, 90 percent of those ages 15 to 34, 80 percent of those ages 35 to 49, and 60 percent of those ages 50 to 64 used social media regularly, according to Statistics Canada.
But these platforms are still relatively new and have not historically been the place people have gone to find market perspectives.
Social media giant Facebook was founded, and its parent company is now Meta Platforms Inc. and Reddit and Twitter Inc. in 2004, 2005 and 2006, respectively. TikTok, where influencers and personal financial content are now prevalent, launched in 2014 as a primary app for lip-sync videos before expanding into its current form.
“It’s hard not to have a headline on your phone that talks about inflation, real estate and the markets,” says David O’Leary, founder and director of Kind Wealth in Toronto.
“I think that’s partly driving the focus on inflation rather than the fact that the markets are down a lot.”
Melissa Kachira, investment advisor at BMO Nesbitt Burns Inc. In Windsor, Ont.; It has gone through multiple recessions with many of its long-term clients, but the current environment stands out for comparison to the economic recession of the early 1980s.
I find that a lot of people quote things that happened in the ’80s and how this has been the worst inflation since then [then]to indicate what they know about the economy through social media.
Ms Caschera notes that some clients have re-read her Facebook posts.
“I just try not to give it any legs and try to direct clients to secure resources for their information through … scraps or email links from actual economists and strategists who have something to say on the matter,” she says.
More clients are emailing him to share articles about market developments and get his piece, something he rarely encountered in the 2020 market downturns, says Paul Shelestowsky, senior wealth advisor at Meridian Credit Union in Niagara-on-the-Lake, Ontario. , 2015 and 2008.
“A lot of my clients have retired and may not be on Facebook, but they are online most days…and those addresses are everywhere,” he says. “The challenge is that 99 percent of the headlines are bleak and bleak.”
Mr Shelestowsky says clients are “tired” of seeing “red in the markets” week after week.
He believes that his inundation with headlines and fliers made this downturn feel worse for customers than the March 2020 market crash, which was a steeper decline but ended more quickly. In some ways, it looks worse than the devastating recession of 2008, which is starting to fade in their memories.
Social media has made customers well informed
Daryl Brown, financial planner and founder of You & Yours Financial and Director of Portfolio Strategies at Spring Planning Inc. In Toronto, social media has made customers more informed about what’s happening in the market. The two most important concerns his clients have are what rising inflation means for everyday life, and how it affects their choice of investment.
“I think it’s interesting how the social media landscape has put these two pieces in front of people and provided them with a great deal of investor education,” he says.
“They come into conversations very well informed, compared to other downturns.”
He says his clients aren’t in the far corners of social media, but he notes that it can be difficult for investors to find the right kinds of voices and information that help reason with their portfolio. Clients were asked to consider the job and background of social media personalities, and why they are active on these platforms before proceeding.
Similarly, O’Leary says social media has led to “high-level” awareness among clients of the global nature of inflation and the role geopolitical tensions with Russia play in current market volatility.
“People may be more aware that declining markets have nothing to do with their investment manager or Canada’s fiscal or monetary policy,” he says. “What’s happening in the market is driven by global rather than local factors.”
How do you cut the noise?
Consultants take various approaches to beat the social media hype and address clients’ concerns.
Mr. Shelestowsky says when clients are in review of their financial and investment plans, he will show them their plans with a lower hypothetical rate of return or a 3 percent annual inflation forecast to prove they are still on track to meet long-term financial goals.
“Looking long-term,” he says, “six months or even one year of negative returns shouldn’t derail that plan if it’s a good plan.”
“I can tell them over and over again that things will recover and be OK, but when you can show them that, specifically, their situation and their plan, that’s where the peace of mind comes in.”
Ms. Caschera says conversations with clients have evolved as market information becomes increasingly common. It makes sure to distinguish that its diversified portfolio will not perform quite as well as the major stock or index markets.
Mr. Brown says he has been dispelling inflation myths and making sure clients understand that while inflation is increasing rapidly now, it will not stay at these levels forever. He also talks about any potential effects on their wallets, but notes that in the vast majority of cases, there is no need to take action.
Meanwhile, when Mr. O’Leary begins a relationship with a new client, he takes the time to explain to them that markets can be unpredictable, and that they should expect periods of significant downturns – especially after a very long bull run – and that volatility is part and parcel of it. of the relationship between risk and return.
He says those advance talks have paid dividends lately.
“If you have those conversations and [then] “You speak to them again and remind them, that carries a lot of credibility and weight,” he says.
“It doesn’t look, in their minds, like you’re making it up so quickly because things are going badly and you’re now trying to appease them.”
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