Client Behavior & Communication
Volatility Protocol
The Market Downturn Conversation: A Volatility Protocol That Protects Client Trust (and Assets)
When volatility rises, the advisor's job is to protect decision quality. This protocol combines pre-commitment rules with a 12-minute downturn conversation that helps clients avoid irreversible mistakes.
Sources
- Vanguard Advisor's Alpha framework
- Morningstar: The value of advice
- FINRA investor guidance for turbulent markets
- Nuveen communication guidance for volatility
Highlights
What This Gives You During Volatility
2 layers
pre-commitment plus live downturn execution
12 minutes
for the core downturn conversation flow
Section A
Layer One: Pre-Commit in Calm Markets
The best downturn call starts before volatility appears. Set expectations, install guardrails, and define default actions at onboarding and annual reviews.
1
Use a range narrative
Tell clients their plan assumes down years. The objective is not to avoid drawdowns. It is to avoid permanent damage from reactionary trades.
2
Document mechanics, not forecasts
Write the exact rebalancing rule, liquidity plan, and call-first protocol before the next stress event.
3
Install cooling-off rules
Examples: no same-day liquidation decisions, 48-hour review for allocation changes, and a quick tradeoff review for large unplanned spending.
Section B
Layer Two: The 12-Minute Downturn Conversation
4
Minutes zero to two: regulate first
Start with emotion, not portfolio analytics. Ask what outcome the client fears most, then reflect it back.
5
Minutes two to five: normalize bias
Frame loss aversion and recency bias as normal human defaults. This lowers shame and opens better discussion.
6
Minutes five to eight: re-anchor
Check only three variables: timeline, 12- to 24-month cash need, and cashflow stability. If none changed, the plan remains intact.
7
Minutes eight to ten: provide safe action
Offer plan-consistent action so anxiety does not demand an impulsive trade. Use rebalancing, tax-loss harvesting, or a scheduled review.
8
Minutes ten to 12: lock the decision
Close with a clear commitment and next follow-up date. Confirm that no irreversible change happens today.
Section C
Post-Call Email Template You Can Send in Two Hours
Keep the summary short and concrete. Use client language where possible.
Subject: Next steps during volatility
- What you are most worried about
- What changed and what did not
- What we are doing now
- What we are not doing today
- Our next check-in date and time
- Reminder: call me before any portfolio changes
Section D
Set Communication Cadence by Behavioral Risk
Do not call everyone with the same urgency. Segment by decision risk, not only by AUM.
9
Tier one: high behavioral risk
Households with anxiety history, concentration, leverage, or near-term liquidity needs should receive personal outreach fast.
10
Tier two: stable profile
Send personalized video updates and offer office hours for questions.
11
Tier three: low intervention needed
Send concise updates and let clients opt into follow-up.
Section E
Use Process Language, Not Prediction Language
Language that helps
- "We built this plan for markets like this."
- "Let us separate market risk from goal risk."
- "We are following the process we already agreed on."
Language that backfires
- "It will come back soon."
- "Do not worry."
- "You are overreacting."
Section F
Change the Plan Only When Fundamentals Change
12
Legitimate change triggers
Job loss, business revenue shock, health events, major spending changes, forced retirement, or concentration becoming unacceptable.
13
How to frame it clearly
Say: "We are not changing because markets are down. We are changing because your cashflow changed."
References
Sources and Further Reading
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