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How to Prepare For Recession

Everyone from financial experts to the household budgeter is wondering the same thing: How to prepare for recession?

Skyrocketing gas prices, the war in Ukraine, and rising interest rates.

All these things make very worrisome conversations circulate in the news. And maybe in your office too. 

However, there’s no need to panic. You should always be financially prepare. But don’t change your entire investment strategy based on some predictions. After all, nobody has a crystal ball – not the weather person or the economists. 

You’ll always want to have a financial umbrella for rainy days. But don’t expect a torrential downpour. Your clients may be panicking, but you’re the voice of reason for all of their concerns. Read on to learn more about what is being predicted, why you shouldn’t worry, and how to prepare for recession. 

The Media’s Take on Recession Predictions

Recession is a scary word for many. When financial and personal security are met with scarcity, it can cause a freeze effect on many. They may even want to start pulling out every investment they’ve worked hard to maintain. However, headlines prey on curiosity rooted in fear. 

Forbes reported on these misleading headlines, such as one from a typically credible source – Fortune.

‘Risk of a recession is rising as problems just keep cascading throughout the economy, economist says’

Isn’t that a little worrisome?

However, Forbes has also reported what happens if you compare their numbers to the years of risk prior to the pandemic’s uncertainty. Then the answer is average, despite the scare tactic wording. This is just one of several major news outlets that have conflicting information. 

The bottom line is this – you can always find a reason to be financially fearful.

While the Great Recession of 2008/2009 is on the top of your client’s mind, it is highly unlikely to reach that severity.

So, how to prepare for recession?

We can discuss their game plan before they happen. That way, their decisions are founded on logic instead of emotion.

Sticking to your plan has proven to be beneficial, even during periods of recession. An example of this is the well-known S&P 500 investments. From 2011 to 2020, they bounced back almost 30 times as much. Your clients can still achieve their financial goals by simply sticking to your plan instead. Investing in stocks and attempting to manage market downturns can be time-consuming, complex, and unsuccessful.

How to prepare for Recession and How to adress your Clients

The 2 best things you can do for your clients are:

  • Finding ways to stay in touch with clients
  • Providing them with information about current financial conditions.

They should be informed about market conditions, and you should also address their worries about their assets’ long-term viability and financial stability. 

Communication is key, asap. 

When your clients ask how to prepare for recession, just schedule a quick zoom meeting or phone call. That way you can update them on their portfolio and ask about their thoughts on the current economic forecast.

Chances are, they’ve already seen something in the news or online. So it’s crucial that you find out if they’ve read some misleading headlines you can shine some light on. 

A great idea to save time and reach out to your current clients is by emailing short videos or webinars that give them an update, and hope, for what’s happening in the current market.

You should always include a CTA (call-to-action). That way, you encourage them to book a meeting, call, or send an email with any questions they have about their specific situation.

All of these will guarantee you’re top of mind and readily available to help them navigate these unpredictable times. 

Portfolio diversity and budgeting ideas. 

Your clients likely have short-term, medium, and long-term financial goals.

The fear of not knowing how to prepare for recession can quickly overwhelm them. Are we going to be able to pull out the college fund on time without losing any money?

This is when you can strategize budgeting ideas or portfolio diversity. One popular method is the “bucket” method

A common example of this can include 3 types of buckets:

  • One for immediate costs and emergencies (perfect for newlyweds that purchased a fixer-upper)
  • A medium-term bucket for the kids’ college funds
  • A long-term bucket for retirement income.

Instead of panicked urgency, you can help your clients put logic ahead of emotion by realizing the timeline for each investment strategy. 

If a client wants to be proactive while minimizing risk, refinancing their house loans or debt may be a reasonable alternative. It’s not for everyone. But it might save you money and time in the long run.

Clients who plan to stay in their house for an extended period of time, or for whom the cost savings may reach break-even in a few years, may believe this to be an excellent alternative.

Put on your coaching hat.

A financial advisor’s job is hardly just about numbers and data. Sometimes you have to be a coach, counsellor, or simply just a friend.

During economic uncertainty, it’s important to lean into your coaching role to help your clients manage their behaviour.

You’re not only navigating them through the financial decision-making process but helping them manage their emotions along the way. 

How to prepare for a recession as a financial advisor
How to prepare for recession as a financial advisor

How to Prepare For Recession: Final thoughts

At times like this, it’s crucial to stay in touch with clients, share insights, and provide comprehensive financial planning in order to strengthen advisor-client relationships and set the stage for a less tumultuous future. Have you thought about the people you could be helping beyond your client? That’s right, we’re talking about their adult children. Read our last blog on how to build long-lasting relationships with the future of your business. 

Are you afraid that the possible whispers of a recession may affect your growth this year? Well, you’re in the right place. At Leading Advisor, we help you clear your roadblocks so you have clarity in growing your business and helping your clients without clocking in more hours. Do you want to be the next success story? Contact us to learn more.