Step 1

Prepare your client communications

Discussing how to respond to a market slowdown is a conversation that can be tough to have. Even the mention of a downturn can be scary. While many clients realize that the market can't go up forever, the reality of a bear market can push clients into making poor decisions. Preparing your clients for volatility now may help reduce anxiety when the market drops. Knowing what to expect can instill confidence. Talking to your clients about volatility can be easy. You can use our "Buy Low, Sell Why?" flyer, which explains why staying invested and sticking with their plan can help them pursue their goals. It's easy to show clients that despite bear markets (represented by the red parts of the line in the illustration below), the market moves higher over time and that selling out of the market can be detrimental.

You can refer to the chart below as you kick off the conversation by asking your clients the listed questions.

Source: SPAR, FactSet Research Systems Inc.
Past performance is no guarantee of future results.
*Dow Jones Industrial Average, 4/28/42–12/31/23.
Returns are shown based on price only. It is not possible to invest in an index.
The Dow Jones Industrial Average (DJIA) measures the US stock market.

Conversation Starters

Question "Looking at the bear that started in ____, with the benefit of hindsight, what could you have done?” 

Insight Emphasize that either of the typical answers, buy more or wait it out, are good.

Question "Is the line in the chart generally going up or down? Does the market spend more time in bear markets (red parts of line) or bull markets (blue parts of line)? Can you see how the market was able to rebound after declines? Given this historical perspective, what should an investor do when markets decline?"

Insight Point out two recent bear markets that most clients remember — the dot-com bubble and the financial crisis. Underscore that making emotionally driven decisions during bear markets can be counterproductive.

Question “When the next bear market occurs, we won't have the benefit of hindsight, but what do you think you should do when the market declines?

Insight  Drive home your point with this question and write down what they say. When the market drops, call your clients to answer any questions and give your perspective. Then ask, “When we talked about bear markets a few weeks (or months) ago, you said your plan was to wait it out (or buy more or move some assets to stocks). Do you still think that’s the right plan?

Start planning today to turn adversity into opportunity.

Step 2

Step 3

Provide educational materials

Most clients have a hard time keeping calm and on track during market declines. So it's important to be proactive, to arm them with knowledge and to ease their anxiety. Educational resources can help keep your clients on track and focused on their investment goals. Here are some of the tools and resources that you can mail, email or present in person:

Principles of Investing with Resilience Client Seminar

This educational seminar can be used with clients and prospects alike. It addresses volatility head on and explains how to navigate volatile markets, as outlined below.

• Explains that volatility is a normal part of investing
• Demonstrates how emotion-based decision making and market timing can impact a portfolio
• Delves into the benefits of taking a long-term approach and the power of compounding
• Explores how diversification can help manage risk and add return potential
• Shows the importance of a proper allocation

Principles of Investing with Resilience Playbook

For one-on-one meetings with your clients or prospects, this playbook-style presentation is a modified version of the client seminar, with easy to understand key points and actionable takeaways.

Client Resources

Step 4

Assess clients' portfolios

Your investment plan is another tool in your arsenal. A well-allocated portfolio may be a key part of minimizing the impact of a bear market, and knowing what you own is more important than ever. While you can't control the market, analyzing and reassessing your clients' portfolios is something you can manage.

Rerun your Matrix
It's been over 10 years since the financial crisis; as a result, 10-year numbers may provide less insight. However, IRIS, MFS' new analytical tool, can run 15-year data if they're available. We use IRIS to compare funds and create simple, easy-to-read reports that go beyond standard performance, providing real transparency. IRIS is an in-house analytical resource using third-party data and provides a high-level fund overview, including asset allocation, holdings and fund statistics; multiple views of performance and risk measures; and a comprehensive breakdown of funds. The result? Clients can be confident they know what they own.

Stress-test client accounts
There are a number of financial planning software packages available on the Internet for stress testing portfolios.

Review risk tolerances
While executing your silver linings action plan with clients, you can review your allocations to make sure they're still aligned with the clients' risk tolerances. This is especially important for retired clients, who are more affected by downturns because they rely more on their portfolios.

Conduct a liquidity review
Keeping a portion of client assets in liquid assets ensures they have access to funds if they need them. Conduct a liquidity review to see which assets could be sold without impacting clients' long-term financial goals.

Step 5

Analyze Your Investment Managers

The financial crisis most likely formed a lasting impression in your clients' minds, perhaps placing a premium on downside risk management. As the bull market hangs on, it may be more important than ever to find managers such as MFS that have navigated effectively through full market cycles and have a risk-aware culture. To find out if your manager has these key capabilities, ask them the following:

• Do you have a succession plan in place? What happens when a key person leaves?
• What kind of attrition have you experienced over the past five years?
• How do you compensate you portfolio managers and analysts? Which period is most heavily weighted in your compensation? In other words, is your compensation aligned with your clients' long-term goals?
• Do you have a clear risk management process? How long has it been in place? 
• How do you manage capacity?
• In a fiduciary-advice world, how are you addressing fees?
• How did you fare over the last bear market? 

Founded in 1924, MFS has actively managed assets through the Great Depression, wars, recessions and the global financial crisis. We manage the oldest mutual fund in the United States, and to this day no other mutual fund company has navigated more bear markets. 

What sets MFS apart is our commitment to a single purpose: to create long-term value for clients by putting investors' money to work responsibly. We do this by taking a long-term view and striving to protect capital in difficult markets