Morningstar Advisor - August/September 2013 - (Page 8)
By Carl Richards
I still remember how I felt in 2008. I’d sailed
through 1998, avoided the tech bubble in
2000, got through 9/11, and didn’t even pause
for the SARS craziness in 2003. During a
decade I think most advisors would describe as
bumpy, I felt confident I had the skills as an
advisor to deal with whatever the market sent
my way. Then came 2008. I stayed up late into
the night, waiting for the markets to open in
Japan, desperate for some sign of relief. It was
one of the most difficult points in my career as
an advisor. It turns out that I wasn’t alone.
Earlier this year, a study was released that
showed 93% of surveyed advisors and
planners suffered from post-traumatic stress
disorder after the 2008 financial crisis. And
2008 did more than just push us to the
edge mentally. It changed the advice we were
giving, according to the study, which was
published in the Journal of Financial Therapy.
Almost half of those financial planners
followed by study author Bradley Klontz said
the financial crisis caused them to dramatically
rethink their strategies. “There’s an entire
industry that’s moving to tactical planning or
market-timing,” he says.
A slew of recent studies of investment
strategies confirmed as much. Newsletter
publisher Bob Veres, for example, conducted
a survey that showed 83% of financial
planners moving away from buy-and-hold
strategies toward market-timing. Take a minute
to let those numbers sink in. If 83% of financial
planners, who were previously OK with
a buy-and-hold strategy, are looking at other
investing models, a shift that big should
be treated as a warning sign by the industry.
Morningstar Advisor August/September 2013
We have a hard job. Saying to your client,
“I’ll worry about the market, you just behave,”
means we carry the emotional burden of
looking out for our clients’ interests. It’s our job
to walk people in from the ledge. I see little
reason to be surprised that this profession
comes with high stress. So, the questions we
need to ask ourselves are, how can we avoid
falling off the ledge ourselves and what
guardrails do we need in place to keep the
worst of the market cycle from causing us to
make poor decisions?
First, we need to acknowledge that the stress
is real. It will only make matters worse if you
pretend you don’t feel the stress. By acknowledging that the stress is real, you’re creating
the opportunity to do something about it.
Second, talk to someone. I suspect that one
of the reasons 2008 hit me so hard is that I
operated as a solo advisor. There’s nothing that
says you can’t get through the emotional
roller coaster alone. But it does mean you’ll
benefit by finding a trusted peer or group to talk
to now and to rely on in the future. You may
even benefit from professional help, too.
I don’t believe I’m overstating when I say that
stress is a very real problem for the industry.
We owe it to ourselves and to our clients
to do something now to prevent it from causing
us to make poor decisions in the future. K
Carl Richards, CFP, is director of investor education at
BAM Advisor Services and author of The Behavior Gap:
Simple Ways to Stop Doing Dumb Things with Money.
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