D.J. TIERNEY: We all know that 2025 has delivered significant new uncertainty about the future path for the US and global economies. And in the US, we’re currently in the midst of shifting from a deceleration stage of the economic cycle to a contraction stage. So it’s really no wonder that investor confidence has plummeted, and advisors now face clients who are justifiably anxious about their investment portfolios.

Keeping clients invested, emphasizing the benefits of diversified investing, and helping Baby Boomer clients position for capital preservation and income are three likely challenges most advisors face in 2025. By viewing these challenges through a behavioral finance lens, here are three tactics to help you address client concerns.

First, clients wanting to sell risk assets amidst volatility are exhibiting loss aversion. A coaching tip is to acknowledge that their concerns are understandable, but then point out that a diversified portfolio with fixed income and international stocks has generally held up much better than US stocks in the first quarter. Many balanced portfolios actually had positive returns in the first quarter.

Second, clients who have shunned international stocks in the past due to the protracted US rally and a home bias may be more open to allocating a portion of their portfolio to international stocks now. This portfolio adjustment may help them feel that their worries about the markets are being addressed.

And third, the financial media focuses mostly on US stocks, and the Baby Boomer generation may be particularly susceptible to the familiarity and recency biases. Baby Boomers have likely benefited from the rally in US stocks for the last 20 to 30 years, and now could shift portfolios towards income and capital preservation. There’s a reasonable case for intermediate-term investment grade corporate bonds and municipal bonds, especially for retirees who need stable income.

If you’re looking for tools and insights to help coach clients, please check out our Advisor Playbook. It has suggestions on anticipating and managing investor biases through economic cycles and market volatility. Additionally, if you have questions about your portfolio client portfolio allocations, we can provide portfolio consultations where we benchmark your portfolio versus our model portfolios for comparative analytics.

We are here to support you.

Past performance is no guarantee of future results.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own protessional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market..

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to /arious other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk

Tax-exempt bonds are not necessarily a suitable investment for all persons. Information related to a security's tax-exempt status (federal and in-state) is obtained from third parties, and Charles Schwab & Co., Inc. does not guarantee its accuracy. Tax-exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.