The Shelter in the Storm: Talking to Your Clients about an Interest Rate Hike

John Diehl   |  Tue May 12 09:00:00 EDT 2015


The most recent Jobs Report has reignited headlines debating when the Fed might possibly announce an interest rate hike. Chatter around the subject abounds, with every media outlet weighing in and quoting an expert about the impact of higher federal interest rates. Some even include a list of what consumers should do before the as-yet-to-be-confirmed rate rise, urging them to pay down debt, make big purchases now, and prepare for stock market losses.

The rate hike debate, while important, is just another example of how the news of the day can serve as a ‘doom and gloom’ trigger for investors. I routinely address the topic of media-induced panic with financial advisors, citing research that shows how this overload of information has the potential to incite panic in your clients, pushing them to make emotional investment decisions.

So how do you ease your clients’ fears for the implications of increased federal interest rates?

Focus on the long-term
Anxious investors are stuck in the moment, worrying about how to avoid losing money now, and so you need to redirect their attention back to their long-term plan. Remind your clients that it may be more fruitful to ride it out, because making rash investment moves could do more damage than good in the long-term.

Act as a trusted partner
Be there for your clients as an advisor and friend. Trust is going to be critical, so don’t just talk to your clients about what they should do with regards to their finances. Take the time to ask them about their families, engage them in friendly conversation, and show an interest in their careers or pastimes. In doing so, your clients will see you as more of a partner, someone who is genuinely concerned for their well-being. As a result, these clients will rely on you for support in high-anxiety times, and will be more likely to heed your advice.

Provide them with educational resources
What your high-anxiety clients will want to see from their advisors is action, so bring them into the conversation. Don’t overload them with more information; instead, focus on providing clarity around the realities of an interest rate hike and sharing perspective on past interest rate hikes – what caused them, how did markets react at the time, what sectors might have been more or less impacted, and how the current cycle may or may not resemble the past. You can also show them how impulsive, short-term-focused decisions can have negative repercussions on their financial plan, and give them other tools to look beyond the 24-hour news cycle.

The bottom line is that we don’t know yet if or when the Fed will announce an interest rate increase, but the guessing game continues. Don’t let your clients fall prey to the headlines.

All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable.

The preceding is not intended to be a recommendation or advice. This material is intended for general use by financial advisors.



John Diehl

John Diehl  

Senior Vice President, Strategic Markets Hartford Funds

John Diehl is senior vice president of Strategic Markets for Hartford Funds. He and his team are responsible for engaging and educating financial advisors and their clients about current and emerging opportunities in the financial-services marketplace. These opportunities range from tactical strategies in areas such as retirement-income planning, investment planning, and charitable planning, to anticipating and preparing for long-term demographic and lifestyle changes. John also oversees Hartford Funds’ relationship with the Massachusetts Institute of Technology AgeLab.

John joined the company in 1988 and was promoted to assistant vice president in 1991 and vice president in 1997. He was named senior vice president in 2007, while he led the Retirement and Wealth Consulting Group, which was responsible for building awareness and knowledge of retirement challenges and the latest planning strategies to address them. In 2012, John was named Senior Vice President, Strategic Markets; in this role, he devotes his efforts to serving the needs of financial advisors and their clients.

John has been widely quoted in consumer and trade publications such as The Wall Street Journal, Financial Planning, and On Wall Street. He has also appeared as a featured guest on CNBC and Bloomberg Television to discuss his views on retirement-related topics.

John attended Moravian College in Bethlehem, Pennsylvania, where he earned a bachelor’s degree in economics. He has been a CERTIFIED FINANCIAL PLANNER™ (CFP®) since 1991. In addition, he holds the Chartered Financial Consultant (ChFC®) and Chartered Life Underwriter (CLU®) designations. He is also FINRA Series 6, 7, 63, and 26 registered and holds a life and variable insurance license.

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