In times of market stability, financial advisors and clients engage in a zone of clarity. There is a mutual understanding. Clients are calm, conversations are based on reason, and plans are reviewed with a shared sense of long-term thinking.  These are the moments when the prefrontal cortex, the part of the brain responsible for rational thought, planning, and decision-making is in charge.

But when volatility hits, everything changes. The rational mind moves to the passenger seat and the emotional mind grabs the wheel.

Suddenly, you’re no longer engaging with the same reasoned version of your client. Their limbic system, the brain’s emotional and survival centre, has taken over. Fear, panic, and uncertainty drown out the calm logic that once guided investment decisions. You can present compelling charts, historical data, and evidence-based reassurances, but it won’t register. Why? Because you’re trying to speak rationally to a brain that is no longer listening rationally.

This is the critical inflection point where we tend to get it wrong.

A different brain requires a different conversation

In fight-or-flight mode, humans aren’t looking for long-term strategy. They are scanning for immediate threats. It is all about survival. Your client is now driven by primal instincts focused on protection, not performance.

This is not simply a change in mood – it is a neurological shift. Trying to reason with someone in this state is like trying to explain compounding returns to someone being chased by a lion.

This is where emotional intelligence (EQ) becomes the most important tool in an advisor’s skillset. Not a deep dive into economic indicators, spreadsheets or another pie chart. What is required is empathy, presence and human connection.

From “expert” to emotional anchor

During volatile markets, the advisor’s role transforms from rational strategist to being an emotional stabilizing force. Your calm presence matters more than your predictions. Your ability to attune to what your client is feeling becomes the bridge that prevents destructive decisions.

Clients in a heightened emotional state do not want to hear, “Everything will be okay.” That can sound dismissive. What they need is to feel seen and heard. It’s more effective to say, “I hear you. What you’re feeling is valid. Let’s walk through this together.”

When clients feel heard and understood, they feel safer. And when they feel safer, the rational mind slowly returns. A thoughtful conversation will allow them to “zoom out” and regain perspective. It will give them the space to reflect and engage with their rational mind – mitigating the emotional overwhelm.

Rehearse in peace so you can perform in chaos

Do the lifeboat drills whilst you are in the harbour, not when you hit an iceberg.

Wise advisors prepare for these moments during times of calm. They don’t just educate clients about market cycles. They help clients to be aware and prepare for the emotional reactions that come with them. They build trust and understanding before the storm.

That preparation allows for pre-agreed responses when volatility strikes. Recalling previous discussions reminds clients not just of “the plan,” but the purpose behind their investment decisions.

Using “IF-THEN” frameworks can be particularly powerful: “If X happens, then we have agreed to do Y”. These pre-commitments offer clarity in chaos and reduce the odds of emotional reactivity.

Perspective is a superpower

One of my favourite commentators, Barry Ritholz, suggested that: “Human beings are highly imperfect organisms as investors. They are impatient, given to bouts of fear and greed, make analytical errors, suffer from bad data interpretation, overrate their own abilities. And that’s before we get to POS (plain ole stupid).”

The true value of a financial advisor during turbulent times is not in better predictions—it’s in better connection. Understanding people becomes more important than understanding markets.

The market is unpredictable. Emotions are inevitable but poor decisions are avoidable.

 

The above article was written by Marius Kilian.

 

Source

* “The kinda-eventually-sorta-mostly-almost Efficient Market Theory”, Barry Ritholz, ritholtz.com, 20 Nov 2004