Bad Markets and Client Interactions

Some best practices and what it is all about

One of the silliest things about the advisory profession is that some advisors believe the hard times are when markets are down in a month, or when their client’s portfolio was up but less than the market was in a given year. Routine market volatility where, in a very, very good year, markets will still be down four or five of the twelve months, and the media will still act like each of these 2-5% drawdowns mean anything to anybody, actually take some of our attention. I use the word silly because that is all it is – just silly.

If you have been in the business longer than five minutes than you know that what happened the last ten days (and counting) is the stuff our business is made of. Real drawdowns, real sell-offs, driven by some real news event, the outcome of which remains highly uncertain, are categorically different than what passes for “volatility” most of the time. In my career it has been the dotcom implosion, 9/11, financial crisis of 2008, European debt crisis of 2011, COVID hell of March 2020, and now Trump trade war of 2025. Some were more mild than others (this one is tops for mildness, so far). Some were much, much longer than others (I’d take a deeper, shorter drawdown over a more shallow but longer drawdown, any time).

But all of this is a little unhelpful in that all of these incidents are now being talked about with the gift of an outcome. We know how it ended. It ended, with an ending, and then with investment portfolios resuming their inevitable march higher, assuming the portfolio has been constructed with some sense of decency and sense. However, in the various moments recalled above, there was no known ending while they were playing out, and the questions that surrounded some of them were pretty legitimately scary.

“What if the U.S. quality of life turns to fear of daily terror attacks?”

“What if the next attack is nuclear?”

“What if more U.S. investment firms go the way of Lehman?”

“What if they nationalize the U.S. financial system?”

“What if this recession turns deeper?”

Notice I left questions from the dotcom implosion out. First of all, I didn’t have any clients yet, and second of all, what would I say to “what if Pets.com never comes back?” Ummmm, “good,” or, “maybe we will all learn that the bigger the party, the bigger the scam,” or, “Super Bowl commercials are how I craft my short portfolio,” or, “it seems like we might now focus on this 17^th century idea that companies have.” Sorry, of all in my list, that one was the healthiest of all of them – and if I am supposed to be sad for someone suffering a nasty hangover after a terrible bender, I am not doing great in the empathy category.

But there is another reason the dotcom implosion doesn’t count: The market wasn’t even down. ONE market was – one sector – but large cap value, the Dow, a diversified equity investor – wasn’t even down. It was a face-ripping moment for huge risk-takers, but it was not a systemic period of uncertainty for all. The other moments were.

I am always and forever going to be one who came of age out of 1990’s excesses and into 2000’s excesses, with lessons learned from the former, and experience gained in the latter. The financial crisis of 2008 was the seminal moment of my career because I actually was a big producer by then, had a balance sheet, had a family, had a book – had something to lose. But far more importantly, I had clients who were scared. In 2000, I did not. All things being equal, I would rather learn the lessons of dealing with bad markets and scared clients in something different than the worst economic collapse since the Great Depression, but my ways are not God’s ways, to put it mildly. And as they say, go big or go home. So that real lesson of massive down days that just don’t stop, the reality of global de-leveraging, the phenomena of markets selling off on bad news, then selling off more on what you thought was good news, these things have happened in each “real sell-off” of my lifetime, but only 2008 also came with questions of the existential viability of my employer, the existential viability of all Wall Street, and America’s entire stupid piggybank blowing up (the home equity fantasy). Those were the times that tried men’s souls, and everything since then has felt like child’s play by comparison.

But 2011, 2020, and now 2025 were real, and they did add fodder to what the subject of this article will soon be. But even then, I believe all of the challenges I have felt in post-2008 market sell-offs are some form of PTSD from 2008 (I am being serious), and were never substantively close to the experience of late 2007 through early 2009. The COVID deal was nasty, and it had its own complicating circumstances (like the world being shut down), but even then I believe the anxiety of that market drama was still linked to my “original trauma” – the period of 2008.

I should interject here – I was not in the business in 1973 and 1974, though I spent much of that time under water, if you count amniotic fluid. I was 13 years old during Black Monday, and I was a young man during some of the 1990’s hiccups. I have studied all these periods immensely, too, but have reserved my references in this piece to ones I professionally experienced. I have no doubt other historical incidents offer their own reinforcements, and in some cases, nuances. But you get the idea.

So back to the moment at hand, and to the important part of all this. Our clients. I have written already about the importance of only working with clients who want and follow your advice. I also realize that sometimes (though not very often) it takes a 20% drop in markets and a “this time it’s different” sounding news event to separate the wheat from the chaff. I want to suggest the following five things for you as we go through the Trump trade war, wherever it may take us:

1. While there may be some clients who you realize you have to cut loose in this period (those who become rude with your staff, rude with you, or who commit the unforgivable sin – abandon a good plan). Be as patient, empathetic, communicative, and understanding as you can be, but do not tolerate abuse of your people, and have some self-respect when it comes to yourself. Give them some grace, but don’t become a punching bag. This is basic stuff.

2. Now, let’s take the half-empty glass of #1 and talk about the half-full glass … Go to incredible lengths to never forget those clients who gave you encouragement, love, support, and confidence in these times. Memorialize in your mind and heart those that send letters of faith and reinforcement. These are the clients who keep you alive, and they are plentiful in times like this; don’t be guilty of only letting the negative experiences be remembered.

3. Here is a really tough thing for me to say: Is a rapidly dropping market hard for you because clients are nervous, or because you are nervous? Do you believe the things you say to clients? Do you know in your heart the reality of history, the reality of macroeconomics, the reality of how markets work? Do you believe that risk premia comes because of periods like this, and not having them is not possible? Do you need a gut check (and mind check) before you take your clients through these periods? Just asking.

4. Who are your five most nervous clients, just in terms of personality? Not abusive. Not harassing. Not rude. Not stubborn. Just nervous – vulnerable – wired a bit on the fearful side of things. Have you called each of them? Not email – telephone. Are there more you should call? What can you do besides mass communication (I am assuming that as table stakes) to touch these people?

I should provide some clarification and caveats on this point #4. My firm basically puts out a market communication every single day. Most advisors do not, and most probably shouldn’t. I will do a future piece for B2Bahnsen where I explain why we believe that this content is vital to our business, yet does not contradict our fundamental belief that daily (or weekly, or monthly) market commentary is nearly irrelevant to the real-life outcomes of clients. So I will leave you in suspense … But as for our approach to communications, I live for our commentary and missives, and we have built a business around heavy use of written content, podcasts, and video. We have a real content machine at our firm, so that is happening whether we are talking about great markets, normal markets, bad ones, or collapsing ones. I understand the level of content we put out is rare, but I do assume there is something you put out at some regularity that authentically reflects who you are. My point in #4 is some level of targeted communication above and beyond whatever that normal content delivery is. And the objective of the communication I am referring to here is not your perspective on tariffs, or an update to asset allocation, but rather, “how are you feeling, Mrs. Smith? I wanted you to know you are going to be just fine, Mr. Jones.”

5. Have you found the time to be opportunistic today? This is one of the great secrets of our business. Bad markets are, first and foremost, when you earn your fees, protect your clients, and preserve relationships that are meant to last a lifetime. But they also are, after all that is covered, the lowest hanging fruit you will ever find for new business. You know why? Because when markets are down across the board, and over half of advisors out there have failed to be trustworthy. Over half of advisors get exposed in bad markets for their lazy, effortless, visionless, thoughtless approach to this business. You couldn’t get in front of some of their clients aside from a bad market because the S&P 500 was up and the client was not upset enough about their terrible advisory experience to break out of their inertia. That all changes in bad markets. This is your chance to be an authentic resource, and see where it goes.

I have no idea what tariffs will be on or off today, what bond yields will do, and what cabinet member is going to be persona non grata with the President and which one will not have the relevant advice du jour. I do know that a worldwide trade war is worth more than 20% downside to the S&P, so this may not be over, but we may be in a trade war capitulation. All of these things are unknowable. The rapidity of the April 3-8 decline may have made it seem more traumatic than it was, but we can only say that know because of the white flag waved by the President on April 9. All of this is somewhat unknowable which is true every single day, of every single market event, even apart from the specific one we happen to be living through.

And through all of it, from dotcom to 9/11 to the financial crisis to the COVID moment to the trade war, and to whatever we inevitably go through in another few years, there is always and forever only one question are clients are actually asking us:

Am I going to be okay?

That is it. That is what this whole thing is about.

What you do to ensure that the answer to that question is yes is your divine mission. How you communicate and articulate it is how you sustain your access to that divine mission.