Most clients know that volatility is part of investing but understanding it and living through it are very different. Preparing clients for volatility is second nature to most advisors. What’s often overlooked is the other half of the job: being the steady voice that helps clients manage their emotions when markets test their resolve. Having conversations with clients around volatility is important, but it’s not just about having the conversation. What you say and how you say it matters.

Periods of increased market volatility are great times for advisors to highlight their value. It’s easy to get invested and stay invested when the market is winning, but when the market is down or sideways clients rely on their advisors to help them go against their natural instincts. During these periods, investors often get nervous and seek action when staying the course and sticking to their plan is what pays off most of the time. Here are some easy ways to help your clients stick to their plans during market volatility.

Section 1: Understand why your client is reacting the way they are

Behavioral bias – Cognitive bias vs. Emotional bias

There are many reasons that your clients may feel anxiety around large market fluctuations, but there is not one solution for every reason. It is important to first understand the underlying behavioral bias that is leading to your client’s reaction.

Behavioral biases are mental shortcuts that we all build over time. These shortcuts essentially allow our brains to jump to conclusions faster than if we stopped to gather all relevant facts. Most of the time, behavioral biases help us unconsciously make quick decisions that guide us through our lives. They keep us from having to do deep analyses on every decision point, but sometimes can make us act irrationally. Behavioral biases can be separated into two main categories, emotional and cognitive biases.

Emotional Biases

To identify emotional biases, look for fears based on feelings or hunches; clients may say things like “It feels like the market is going into a recession” or “Everyone is saying it’s not a good time to invest in [asset class].” There are two main emotional biases that investors face during market pullbacks: loss aversion and regret aversion.

Loss aversion is the idea that losses hurt investors more than gains. In a study by Daniel Kahneman and Amos Tversky, they calculated that losses are felt twice as much as gains. This behavioral bias can cut two ways. First, the client may become impulsive and want to sell out of the market to avoid future losses, even when the expected outcome may be positive. Because a downward move is perceived as being twice as bad as the same upward move, clients may want to move to cash during market swings. Alternatively, clients may actually feel the need to hold onto losing positions. This is especially the case with individual stock positions. In this situation, clients maintain positions in stocks with poor fundamentals because they are afraid to lock in a loss on a position they feel could come back any day now.

Another common emotional bias is regret aversion. Clients experiencing regret aversion will make decisions today to avoid regret in the future. Unlike loss aversion, which focuses on avoiding losses, regret aversion is rooted in the pain of what might have been and the emotional sting of imagining a different outcome after a decision was made. This may compel clients to invest in hot stocks or be hesitant to jump into a market they perceive as falling. Regret aversion is not about avoiding losses; it’s about avoiding the emotional pain of missed opportunities.

Cognitive Biases

The second type of behavioral biases is cognitive biases. Cognitive biases stem from a client’s lack of understanding or incomplete facts. When confronted with a cognitive bias, clients may rationalize their decisions with seemingly sound logic. They may pull from recent events and make parallels between the past and current market conditions but fail to consider the broader picture. Anchoring, representativeness, and confirmation bias are the main cognitive biases that clients experience during market pullbacks.

Anchoring occurs when a client fixates on a certain price point. This could be a recent all-time high or the purchase price of a security. This bias can negatively impact a portfolio of individual securities when a client fixates on an arbitrary price and neglects to take in new information about a company’s financial situation. Clients may hold on to positions while they wait for the price to bounce back or wait to buy into the market until an index level is reached.

For clients in broader index portfolios, representativeness may be more dangerous. When a client falls into the representativeness bias, they extrapolate longer time periods from shorter, more recent events. Clients may see major geopolitical events on the news corresponding with sharp declines in their portfolio and believe this trend will continue. In this situation, clients may want to move their portfolio to more conservative allocations. Clients falling victim to representativeness may miss out on long-term gains in their portfolios.

In both situations, anchoring and representativeness, confirmation bias can also intensify the client’s actions. Confirmation bias occurs when a client seeks out information that confirms their previously held beliefs. A client who believes the stock market will fall will look for articles and past events that correlate with their beliefs.

Section 2: Reframing Volatility

Once you have identified the reason for your client’s fears, it is time to either correct or mitigate their biases. Emotional biases are difficult to correct, and most advisors will have to find ways to mitigate or adapt to their client’s emotional biases instead of fully eliminating them. Cognitive biases, on the other hand, can be corrected with additional information. Here are the strategies to focus on.

Clients experiencing emotional biases need to be refocused on their long-term goals. By zooming out on the bigger picture, you can help the client understand that time is their biggest ally and short-term volatility only distracts from their plan. With both of the emotional biases we’ve discussed, loss aversion and regret aversion, clients will need time and coaching to get them back on track. Advisors should focus on financial planning when possible and comparing the portfolio to hurdle rates you’ve set for their goals. However, some clients won’t be able to ignore these emotional biases, and mitigation may be necessary. Here are some mitigation strategies advisors have employed:

Loss aversion

• Using buffer products that have downside protection without eliminating all of the upside potential.
• Paring down individual positions instead of eliminating them.
• Shifting the planning focus to long-term goals not portfolio performance.

Regret aversion

• Ask the clients how this decision fits into their financial plan.
• Allowing them to have a portion of the portfolio used as “fun money” they can use to chase the hottest stocks.
• Adjusting return assumptions in financial planning software to show how different returns affect their long-term goal.

Cognitive biases can be easier to correct than emotional biases through presenting data and facts. Each of the cognitive biases talked about (anchoring, representativeness, and confirmation bias) must be targeted directly with data and information that speak to the clients individual situation. Anchoring can be corrected by first clarifying why the client is attached to a certain price point. Once you have their rationale (often it’s nothing more than a hunch or feeling), bring data into the conversation and explore why the company/benchmark achieved the anchored price point, what has changed, and why you believe this may be a time to cut losses or invest at a different price. Representativeness is best corrected by placing the portfolio in broader context and taking a “zoomed-out” view of markets. Show how markets tend to recover from similar events and how investing only works if you maintain your positions for the long term. Finally, the best way to combat confirmation bias is to take the opposite side of your belief. Instead of searching for articles about why the stock market is weak, look for arguments on why the market is strong. By searching for both sides of an argument, investors will be able to make better informed decisions.

Section 3: The Conversation Framework

The first two sections gave you the diagnosis and the treatment: identify the bias driving your client’s reaction, then correct or mitigate it. This section is about delivery. The same insight can calm a client or alienate them depending on the order you deliver it in. The most common mistake advisors make is leading with logic. A client who feels dismissed stops listening, and no amount of data will reach someone who doesn’t feel heard first. The framework below follows a simple sequence: acknowledge, then reframe, then redirect to the plan.

Step 1: Acknowledge

Before you correct anything, validate the emotion. Your client’s reaction isn’t a character flaw; it’s human wiring. Remember loss aversion: the discomfort they feel watching their account fall really is roughly twice as intense as the pleasure of an equivalent gain. Telling them they’re overreacting only confirms that you don’t get it. Instead, name what they’re feeling and give them permission to feel it. A few openers that work:

• “It makes sense that this feels unsettling. Watching your balance drop is uncomfortable, and you’re not wrong to notice it.”
• “A lot of my clients are feeling exactly this right now. Let’s talk through it together.”
• “You’re not being irrational. Our brains are built to feel losses more than gains, so this reaction is completely normal.”

The goal of this step isn’t to solve anything. It’s to make sure the client feels heard, so that the next two steps can actually land.

Step 2: Reframe

Once the client feels understood, widen the lens. This is where the data earns its place. Vague reassurance like “markets always come back” sounds like a brush-off; specific numbers sound like expertise. Keep a few historical facts ready to anchor the conversation:

• Declines are routine, not exceptional. The S&P 500 has averaged roughly one 10% correction per year since 1928. What feels like an emergency is closer to an annual event.
• Most corrections stay corrections. Of the roughly four dozen corrections since World War II, only about a quarter deepened into bear markets. The base rate is on your client’s side.
• Even bear markets are temporary. Historically they’ve arrived about once every three and a half years and lasted under a year on average — painful, but a small fraction of the time the market spends rising.
• Most years finish higher anyway. The average year sees a double-digit drop at some point along the way and still tends to end in positive territory. A scary stretch and a positive year are not mutually exclusive — in fact, they usually go together.

Match the data to the bias you diagnosed in Section 1. For an anchoring client, focus on what has actually changed since their reference price. For a representativeness client, zoom out and show how similar past events resolved. The point isn’t to bury them in statistics — it’s to replace one vivid, frightening story with a longer and truer one.

Step 3: Redirect to the Plan

Acknowledgment settles the emotion and reframing restores perspective, but neither is the finish line. The conversation should always end back at the client’s own plan, because the plan — not the headline — is the real anchor. Pull up their financial plan and connect the current moment to the goals you built it around:

• “Let’s look at what this actually changes for your retirement target. Has your time horizon changed? Have your goals changed?”
• “Your plan already assumed years like this would happen. Here’s exactly where we accounted for it.”
• “The question isn’t what the market did this week. It’s whether you’re still on track for what matters to you — and you are.”

When a client reconnects with their long-term goals, short-term volatility shrinks back to its proper size. You’ve moved them from reacting to a number on a screen to evaluating progress toward something they care about — and that is a far more stable place to make decisions from.

Closing

Volatility is the moment your value becomes visible. Anyone can hold a plan together when markets are climbing; the job you’re actually paid for is keeping clients invested when their instincts are screaming at them to sell. That work is far more behavioral than analytical. Your role isn’t to predict the next move in the market (no one can), it’s to be the steady voice that helps clients stay in their seats long enough for their plans to work. Diagnose the bias, deliver the conversation in the right order, and you’ll do exactly that.