How Financial Advisors Help During Market Downturns

When markets turn for the worse, it’s natural to feel anxious or uncertain about your finances. Whether you’re nearing retirement, actively investing, or living within a tight budget, seeing economic turmoil can leave even seasoned investors feeling aimless.

During a tumultuous economy, having an experienced financial advisor in your corner can be a significant weight off of your shoulders. They offer perspective, structure, and smart strategies to help you respond thoughtfully, not reactively, to poor market conditions. In this article, we’ll outline several specific ways financial professionals support clients during a downturn, featuring direct insight from advisors on how they help people stay calm and confident.

First Steps When the Market Drops

The first days of a market plunge can feel like a whirlwind. Dramatic headlines, price drops, and nationwide uncertainty set in quickly. During this time, many financial advisors prioritize communicating with clients and helping to allay their fears.

Tj Binkowski, founder of Narrow Road Financial Planning, says his first move is simple but intentional: “The first thing we do is call them.” These early conversations are about offering clarity and restoring peace of mind. “We revisit their strategy, remind them we’ve planned for this, and explain how they’ll weather the storm,” he explains.

Similarly, an advisor might discourage you from making rash emotional decisions, such as selling off assets at a loss. Thomas J. Brock, CFA, CPA, an expert contributor at RetireGuide.com, emphasizes “the importance of maintaining a long-term perspective,” especially when clients feel tempted to abandon their investment strategy.

Emotional Support and Behavioral Guidance

Having the right mindset and perspective is essential to sticking to your long-term financial plan. When markets are in flux, advisors can offer support and guidance to keep your emotions in check. This may prevent you from making damaging irrational decisions, such as selling off assets too quickly or making large purchases in fear of future price increases.

“We empathize and at times get emotional with them. A lot of advisors focus on the math — we focus on the human,” says Binkowski, outlining the role of an advisor when economic conditions are tough. In his experience, asking tough questions like “’Has your purpose changed?’” or “’Do you think you’ll be destitute and out on the street?’” helps clients confront their fears and refocus on their long-term plans.

Unless you’re an experienced investor laser-focused on your long-term plan, seeing markets swing will likely stir up uncertainty. A financial advisor’s expertise helps you regain clarity and stay the course. If you must make an important decision, a professional can walk you through it and help determine the smartest path forward.

Strategic Adjustments to Financial Plan

While staying the course is often the best response during market turmoil, that doesn’t mean your financial plan should remain entirely static. A high-quality financial advisor should be able to help you assess whether adjustments should be made to your strategy based not on headlines, but rather on your goals and immediate liquidity needs.

“Timing the market is nearly impossible, which is why we avoid making knee-jerk reactions to short-term volatility,” shares Billy F. Spencer, CFP^®, FBS^®, CFTTM, director and wealth manager at Crestwood Advisors. He adds that, during volatile periods, he and his firm “encourage clients to focus on what they can control, like spending, saving, and maintaining a long-term perspective.” If any changes are necessary, they’re made “thoughtfully and with intention,” whether it’s portfolio rebalancing, increasing cash balances, or tax-loss harvesting.

Taking a careful and calculated approach with your advisor helps you stick to your holistic financial plan, rather than react and possibly harm your progress. Ideally, your investment strategy should already factor in the potential for occasional market downturns. Adjustments, therefore, should be based on your individual needs and goals.

Importance of Ongoing Communication

When markets begin shifting, active communication between a financial advisor and their clients becomes paramount. It’s easy to focus solely on news headlines and start doubting your financial plan and investment strategy. Professionals can serve as a buffer between the chaos of the news cycle and the logic of your long-term goals.

“Financial advising is built on trust, and trust starts with connection,” Spencer says. “We reach out to clients, especially the ones who we know might need to hear from us. Sometimes just saying, ‘I’m thinking of you,’ goes a long way,” he adds.

The tone and substance of conversations may also shift during periods of market volatility. Rather than simply discussing the big picture and mathematical implications of a downturn, a financial advisor may prioritize helping you understand what’s going on and how it impacts you. As Spencer explains, “During periods of market stress, our conversations shift from just reviewing numbers to helping clients process emotions and reconnect with their bigger picture.”

Market downturns can also shake your confidence in your portfolio, despite planning for volatility. For this reason, your financial advisor may take the opportunity to remind you how your portfolio is constructed and its ability to withstand negative economic conditions. “Care must be taken to instill confidence in one’s clients and explain how their portfolios are designed, via the ownership of select asset classes, to produce adequate levels of stability and liquidity,” Brock highlights.

Why It’s Worth Having an Advisor During a Downturn

Navigating a market downturn without guidance, especially lacking significant investing experience, can be overwhelming. Beyond the numbers, a financial advisor can truly shine by managing your emotions and keeping your long-term goals in perspective.

For those without a professional, this support system is missing. Without someone to offer perspective, it’s easier to let fear drive your decision-making. This can manifest itself in many ways, including:

• Selling assets too early for a loss
• Rushing into large purchases
• Avoiding investing altogether

“It’s completely normal to feel unsure in times like these, especially when markets are volatile and bad news is everywhere,” Spencer says. “In moments of uncertainty, it’s natural to want to ‘just do something’ to regain a sense of control. But before reacting to fear-driven social media posts or investment pitches that don’t quite make sense, we encourage pausing and taking a deep breath.”

He adds, “This is when it’s helpful to talk with someone you trust. A friend, a colleague, or even someone they work with might be able to connect you with a financial professional who can help you slow things down, get perspective, and make a thoughtful plan. You don’t have to go it alone.”

If you’re feeling uncertain about how to navigate today’s market conditions, finding the right financial advisor can make all the difference. Our free matching tool connects you with a vetted fiduciary who understands your goals and can guide you through both good and bad times.