In times of market volatility, investors often find themselves riding an emotional roller coaster of uncertainty, fear, and frustration. Sometimes, irrational optimism can also creep in. For financial advisors, these moments are not just about numbers and asset allocations but people and relationships. That’s where a nuanced understanding of communication and conflict resolution becomes just as essential as market analysis, which can be unreliable over short time horizons.

Volatile markets test even the most disciplined investor. Stories are everywhere talking about the potential for a recession (or not), inflation (or not), and rate cuts (or not). Information overload and filtering become real concerns. Hype from news services and social media can lead clients to second-guess their strategy or fight the urge to panic-sell at the wrong time. Advisors serve as the emotional anchors in these moments, providing perspective, patience, and a long-term view.A financial advisor's most valuable role during such turbulence is reframing the conversation. Instead of focusing solely on short-term price swings (and losses), advisors can help clients revisit their financial goals and assess whether any course correction is necessary. When you are on a boat and the waves kick in, focusing on a point on land that is not rocking back and forth can be helpful. This process of guiding toward long-term goal focus rather than reacting can go a long way in building trust.

But let’s not pretend every conversation with clients is smooth sailing. Stressful environments can bring out the best (and sometimes the worst) in people. Clients may become defensive, overly critical, or impatient. This is where an advisor’s interpersonal toolkit, particularly their conflict resolution style, makes all the difference.

There’s no one-size-fits-all approach to conflict resolution, and understanding your own style and the client’s can help de-escalate tension and keep the dialogue productive. The Thomas-Kilmann model is a commonly used framework in understanding conflict styles. It outlines five primary approaches:

1. Competing – Assertive and uncooperative; used when quick, decisive action is needed.
2. Collaborating – Both assertive and cooperative; seeks a win-win solution using teamwork.
3. Compromising – Moderate in assertiveness and cooperativeness; finds a middle ground.
4. Avoiding—Unassertive and uncooperative, this tactic sidesteps the conflict altogether, which means that needed items are not addressed.
5. Accommodating – Unassertive but cooperative; prioritizes the other party’s needs while often ignoring their own.

Advisors who lean toward collaboration and compromise often fare best in emotionally charged market environments. A collaborative approach works with clients to reassess goals, risk tolerance, and/or financial strategy. It invites clients into decision-making, reinforcing that this is a partnership, not a top-down directive. Competitive and avoiding styles can alienate clients or erode trust over time, while an accommodating style (e.g., turning to cash because that is what the clients asked for) could ignore the advisor’s role as a guide on the side.

Emotional intelligence becomes a significant asset for a financial advisor. Active listening, reading nonverbal cues, and asking open-ended questions help uncover the root of a client’s concern (e.g., is the issue truly a market decline or a deeper financial insecurity).

Advisors are often trained to think about risk management through diversification, hedging, and rebalancing. However, communication is also a form of risk management. A client who feels heard and understood is far less likely to make impulsive decisions that can jeopardize their financial future. Regular check-ins, clear explanations without jargon, and uncertainty transparency can go a long way. Clients respond positively to honesty and clarity even when the news isn’t good. This creates a foundation of trust that pays dividends long after the volatility subsides.

Sometimes advisors wonder how to compete in a world with algorithms, robo-advice, and artificial intelligence. One thing is very difficult to automate; the human element remains irreplaceable, and this is even more noticeable when markets get rough. Financial advisors who can balance sound strategy with strong interpersonal skills are the ones who guide clients safely through the noise. Don’t be afraid to reach out and ask your clients how they are doing or send them periodic emails with data to reframe the narrative in their minds to long-term goals.

Author: Eric Robbins is the Associate Director for Corporate Outreach and Research and Associate Teaching Professor in Finance at Penn State Erie, the Behrend College.  

Editor: Greg Filbeck, CFA, FRM, CAIA, CIPM, PRM, Samuel P. Black III, Professor of Finance & Risk Management, Penn State Erie, mgf11@psu.edu