How Advisors Can Help Clients When Volatility and Anxiety Hit

IN THIS ARTICLE:

• Understanding Market Volatility
• Historical Market Performance
• Hidden Cost of Market Timing
• Strategic Portfolio Management
• The Cash Problem: Safe Today, Costly Tomorrow

Does the following scenario sound familiar? The phones at your office are ringing off the hook as clients react to the week’s headlines. The market dropped 3% more today, and clients want to talk about moving everything to cash.

Chances are, you've been here before, and that you'll be here again. But what separates advisors who retain clients from those who lose them is not just what you say but how you help them see beyond the noise.

Understanding Market Volatility: Why Clients React Emotionally

Market volatility is personal. It triggers fears about retirement, college tuition, and life plans. Your role as an advisor is to reframe that anxiety and remind clients that turbulence is not a signal to abandon ship, but often a normal part of their financial journey.

Market volatility is the cost of admission for equity returns. And while it’s simply part of investing, it’s important to know that navigating it as successfully as possible is where the greatest mistakes often happen. This is easy to understand — when clients see sharp market declines, fear takes over, and the impulse to exit the market becomes powerful.

Historical Market Performance: Evidence for Client Conversations

But history consistently shows that markets often have a way of acclimating somewhat quickly. This is a lesson you can easily share with clients by looking at the past — which is exactly what LPL Research did. Though keep in mind, past performance does not guarantee future returns.

LPL Research compiled a list of major historical and geopolitical events over roughly the past 80 years to evaluate how the S&P 500 reacted after each event. Starting with when Germany invaded France in 1940, they tracked performance over 40 events, in 3-month intervals up to 12 months after the event. Naturally the various events caused short-term disruption of different sizes and durations. But what did the market look like six months after the event? Or a year?

Twelve months post event, average total returns netted on the plus side. There's more nuance to this story, though. Interestingly, they found the average 12-month S&P 500 post-event performance depended greatly on the proximity of an event to a recession.

S&P 500 12-month Performance Post Event

_{Source: LPL Research, Bloomberg, FacSet, S&P Dow Jones Indices, CFRA, Strategas 03/03/26
Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. The modern design of the S&P 500 index was first launched in 1957. Performance before then incorporates the performance of its predecessor index, the S&P 90.}

A few lessons are clear here:

• Markets dislike uncertainty but tend to adapt quickly
• The economic backdrop matters more than the event itself
• Shocks rarely alter long-term fundamentals, though sometimes can deepen a recession

The Hidden Cost of Timing the Market

Another factor to consider is the consequence of leaving the market when it’s volatile. History also shows that there can be more danger leaving the market at certain times than staying in it. Volatility can be one of those times primarily because investors can miss the market’s best days — the ascent back up or recovery days.

It’s easy to see how those best days and the worst market environments often go hand-in hand. Market volatility tests everyone’s resolve, clients and the advisors who help them navigate it. That’s why this article provides talking points, based on history and principles like diversification, advisors can use to help calm jitters and keep your clients on track. The following chart illustrates this point.¹

Market Performance: Best Days on the S&P 500

_{As of March 2026, S&P 500 Index 1996-2025.  A bear market is generally when an index falls by at least 20% from recent highs.  A bull market marks period of rising market index values. Past performance is no guarantee of future results.  All indexes are unmanaged and cannot be invested in directly.}

Walking clients through the past can go a long way to help allay fears. You have other resources in your toolkit that supplement your conversations.

Strategic Portfolio Management: Diversification and More

Clients often embrace a framework that feels like control to them without you needing to forecast the future. Here are three tips for how your expertise makes the difference. Remind them:

1. Diversification remains essential. A balanced portfolio that combines equities, fixed income, and alternatives across geographies should outperform concentrated bets in a normalized rate environment. When one asset class stumbles, others can provide stability. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.​
2. Long-term perspective. The key is not to predict the next headline, but to understand the cycle, stay balanced and avoid emotional decision-making during times of short-term volatility. Thinking about portfolio performance over the course of many years may be a winning approach in the long run.
3. The importance of predetermined timing around rebalancing. Markets rarely move in straight lines, and periodic rebalancing (whether calendar or volatility based) allows investors to systematically buy low and sell high without attempts to time the market.

In essence, this last point is another way to bring discipline into the investing process and avoid emotional and reactive decision making. Keep in mind, rebalancing in response to a volatile backdrop can make sense when markets experience sharp swings.

Cash — Potentially Safe Today, Costly Tomorrow

While significant cash holdings shield clients from market swings, they expose portfolios to inflation erosion and massive opportunity costs (e.g., the compounding effect) that quietly compromise long-term goals.

The compounding effect is profound and a key point to discuss with clients. To earn returns on your returns amplifies growth exponentially over time, so when clients step aside, they don't just miss the initial recovery but the compounding that may follow..

The Conversation That Matters

Market volatility will test your clients again and again. Your ability to help them navigate those moments determines how well they achieve their financial goals. So when their anxiety rises, fundamentals like diversification and staying in the market are your best friends. And your clients.’

Written for investors, this companion piece on investing when markets are volatile can be a great resource for clients – you can send it in advance of a conversation if possible, or as a follow up afterward.