Clients are often not reacting to returns; they are sometimes reacting to something deeper.

In my 30 years in markets, I have seen the same predictable investor behaviour repeat itself whenever markets become volatile. Most advisors have heard some version of this conversation:

• “I know the markets are down, but why am I losing money?”
• “I was earning 7% in cash and now my balance is lower.”
• “Maybe we should move back to the bank.”

The advisor immediately recognizes the investment problem:

• Markets are down.
• The portfolio is behaving as expected.
• Volatility is normal.
• Over time, the diversified solution should outperform cash.

The logic appears straightforward, yet clients often remain unconvinced. This is because the conversation is rarely about spreadsheets or mathematics. It is usually about fear, safety, and the emotional challenge of watching capital fluctuate while drawing an income from it.

For older clients living off accumulated assets, temporary losses feel profoundly different from how they appear on a portfolio statement. The money no longer represents wealth. It represents security, independence, and peace of mind.

When we fail to recognize this, we risk trying to solve the wrong problem.

The Portfolio Is Not Declining.

The client’s sense of safety is.

Advisors are trained to think in terms of expected returns, volatility assumptions, withdrawal rates and time horizons. Clients rarely think this way when fear takes hold.

A portfolio decline may look like a temporary market event to an advisor. To a retiree it can feel like something entirely different. They start to question: “Will my money last?”

At that moment volatility is no longer interpreted as market behaviour. It becomes a perceived threat to survival. During accumulation years, volatility feels manageable because time, future income, and ongoing savings still exist as buffers.

Retirement changes the equation. There is no future salary replacing losses. No additional contributions repairing mistakes. No second chances. The same R100,000 decline that felt manageable at age 45 can feel catastrophic at age 75. What changed was not the size of the loss, but the significance attached to it.

The meaning shifted. The money itself has psychologically transformed from investment capital into life support. This is why advisors often become frustrated when clients react emotionally.

The advisor sees percentages. The client experiences vulnerability.

Clients Measure Against Certainty, Not Benchmarks

Advisors compare outcomes against benchmarks.

Clients compare outcomes against certainty. More specifically, against cash. Cash balances rise in small, smooth increments. Markets move in jagged lines. Human beings are wired to confuse smoothness with safety.

Behavioural research consistently shows that losses are experienced more intensely than gains. But in retirement, something even deeper occurs. Clients subconsciously begin framing volatility as a threat to their security and survival.

A cautious portfolio declining 5% may create more emotional distress than a mathematically unsustainable cash strategy quietly eroding purchasing power over time. The reason for this is that visible pain overwhelms invisible risk. The short-term decline appears immediately on the statement. The long-term danger remains hidden in the distance.

The Hidden Risk Advisors Need to Explain

Cash often feels safe because it avoids volatility. Unfortunately, safety and comfort are not the same thing.

An investor drawing 10% annually while earning 7% in cash has a mathematical problem. Capital slowly declines while inflation compounds and longevity risk increases. What initially appears stable eventually becomes untenable.

Ironically, clients often seek certainty at precisely the moment certainty creates the greatest long-term danger. The advisor’s challenge is helping clients understand that volatility is visible while slow erosion is much harder to detect.

One outcome creates discomfort. The other creates ruin.

Perhaps we Should Stop Solving the Investment Problem First

The instinctive advisor response is to say:

• “Markets drawdowns are temporary.”
• “Stay invested.”
• “Equities outperform over time.”

While factually true, these responses frequently miss the emotional reality. Clients cannot absorb logic while they feel threatened.

Neuroscience consistently shows that fear narrows perception. When uncertainty rises, the brain shifts toward protection rather than analysis. Safety becomes the priority and information becomes secondary. Fear overrides logic.

An advisor’s first responsibility is therefore not explanation. It is emotional regulation. Before discussing portfolio construction, the client first needs to feel understood, not reassured. Sometimes the most important response is simply: “I understand why you feel worried.” Without immediately explaining why they should not worry.

One of the most powerful effects of acknowledging a client’s fear is that it helps normalize the emotional experience rather than making the client feel irrational, isolated, or “wrong” for feeling anxious. A client who feels unheard will often escalate emotionally. A client who feels understood often becomes more open to perspective.

 

Shift the Question

When anxiety emerges, advisors often answer the question clients ask: “Why is my portfolio down?”

Beneath the surface lies the real concern: “Am I going to be okay?”

The first question invites market commentary detached from the broader context of what the client is ultimately trying to achieve over time. It compresses time, magnifies short-term noise, and creates a sense of urgency.

The second question invites a genuine human conversation. The advisor’s role is often to help clients shift their focus away from short-term volatility and back toward their long-term intentions and desired outcomes.

The real question is: “What gives me the greatest probability of sustaining the life I want over the next twenty years?”

That reframing changes everything. The discussion stops being about recent returns and starts becoming about future outcomes.

Advice Is Often Emotional Translation

Advisors sometimes believe their role is transferring financial expertise. I believe that the most valuable advice involves translation. Translating volatility into context. Translating temporary discomfort into long-term purpose. Translating fear into perspective.

Clients need advisors to help them think clearly when emotions become loud. Anyone can explain a benchmark. Far fewer can understand what a retiree is actually experiencing while watching a lifetime of accumulated savings fluctuate.

Perhaps that is where advice creates its greatest value.

To bring perspective.

 

Written by Marius Kilian