Market volatility is a challenge for asset management firms aiming to soothe anxious investors. Firms do well to offer resources on volatility, as these resources might be more important than ever. The market has been dramatically more volatile in the last two decades compared to a relatively calm period between 1940 and the mid-1990s, and particularly volatile recently. By one measure, 2020, 2022 and 2023 are three of the six most volatile years since World War II, with the dot-com bubble and the global financial crisis responsible for the other three most volatile years. Unpredictable events like Covid-19, inflation, wars in Ukraine and the Middle East, weather disasters and general economic unease are all proximate causes for the recent volatility. But if the ultimate cause is the increasing speed of information and trades, then a herky-jerky market is here to stay. Asset management firms do well to help their customers understand and deal with this increased volatility.
CI’s asset management research team has covered volatility resources in two reports over the last three years, to reflect the rapid changes in this area. Below are some of the best practices for asset management firms from the most recent report on volatility resources:
Offer a mix of evergreen and timely resources to educate investors on long-term strategies and their application to current events
Asset management firms do well to offer both up-to-date resources responding to the latest proximate causes of volatility, as well as evergreen resources with long-term views on volatility in the market. All firms covered in the most recent report provide resources like commentaries in response to contemporary volatility trends. Almost all firms also offer evergreen resources—such as long-term strategy tips or reports of historical volatility levels—that remain relevant over time. Franklin Templeton stands out for housing both types of resources from a central location. This ensures investors can easily locate the materials necessary to keep up with market swings and educate themselves on established volatility topics. Recent articles available under the volatility tag include both evergreen and up-to-date articles, like a long-term economic outlook and the potential market effects of conflict in the Middle East.
Engaging tools encourage investor interaction and discourage emotional trading
Tools provide a way for firms to personalize volatility resources, assuaging investor fears by allowing them to interact with tools customized to their concerns or current investments. These tools also provide an important emotional outlet, allowing investors to see how attempting to time a volatile market might affect their portfolio.
As a best practice, firms should include tools in their volatility resource offerings to further personalize the investor experience and drive investor interaction with site materials. Only two firms in our coverage set, Putnam and Franklin Templeton, directly embed a tool into their volatility resources sections. Both tools serve to calm investors by ensuring their investments will likely not suffer as much as expected in a volatile market.
Putnam and Franklin Templeton take slightly different approaches, but both firms’ tools serve as useful methods to engage investors by allowing them to adjust different criteria to better understand market conditions. Putnam’s tool encourages optimism among investors by highlighting potential gains from staying invested. A tool with a positive spin likely aids novice investors who may be unsure how to handle first-time market volatility. Franklin Templeton allows investors to toggle with different market conditions to see which factors will offset or catalyze recession, which might be beneficial for investors who want a better understanding of what constitutes a recession and what market signs to look for.
House resources in a well-organized central location, such as a dedicated page
Asset management firms should ensure that investors can easily locate and leverage volatility resources from a central location—such as a dedicated page or an Insights page with a volatility-related filter—during periods of uncertainty. A centralized location also demonstrates the breadth of firms’ expertise by displaying resources as a cohesive collection of materials rather than scattered updates. It also presents volatility as an important topic for investors to understand, rather than a niche concept driven by current events. Dedicated pages can offer more value than insights or product page filters, as firms can display both timely market updates and evergreen educational materials. However, only around half of firms (57%) provide such a dedicated page. Of these firms, all but one commendably promote this resource on the homepage. Findability otherwise varies across the coverage set.
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