I’m sure you don’t have to be told that we—and I mean not just the planning profession, but the country and the world—are in a big awful mess. The Covid-19 virus has disrupted everything: the health and safety of us and our friends, relatives and clients, the economy and client portfolios.
It reminds me of stories my parents told me about the Great Depression and World War II, which was basically a story of collective sacrifice as we faced great and sometimes mortal threats. Of course, my parents survived it (or else I wouldn’t be here), and we both know that our society will survive this as well.
I’m writing, not because I believe you need my advice, but because I deeply want to comfort you and lighten your load a bit. Let me offer these thoughts in a particular order.
First, I would ask you to recognize that you, as a financial services professional, are going to experience a lot more stress through this pandemic than most of the people around you.
Most advisors that I talk with consciously, and as a matter of professional routine, do something remarkable: they take on the worries of their clients. When the markets go down dramatically (for the third time in three decades, all of them labeled “once in a century” events) you try to do the worrying so your clients don’t have to. You lie awake at night thinking about whether they’ll be all right, and look for ways to reduce the damage of a market downturn.
Taking on the worries of friends and family is hard enough. Taking on those same worries professionally, and being in a position to take action at a time when there are few real actions that can be taken, can be unbelievably stressful. My request is that you practice self-care, and periodically remind yourself that the market downturn is not your fault, and that it will eventually pass. You are not responsible.
Second, recognize that you’re part of the human herd. By that I mean that you probably have the instinct to sell and get out of the way of whatever the market does in the unpredictable future. You can create certainty by retreating to the sidelines, as I’m sure at least one or two clients (no matter how well you’ve trained them) are requesting. I know you’re telling those clients to be rational through this crisis. But you should recognize, at a deep level, that you, yourself, are not immune from the outcries of the irrational, instinctive part of your brain—which scientists tell us is the most powerful (most especially in times of crisis).
This is precisely why investing is not easy.
Please recognize your own humanity in this crisis, and share it. Help your clients see that you, too, are emotionally affected by the events of the world. This will be the best way relate to them, to comfort them, and to guide them.
My third piece of advice is to be kind to those clients who are begging you to make a big mistake with their portfolios. You know that the right time to sell was weeks ago, when nobody could have predicted the market downturns, and you know that there is no easy way to know when to get back into the markets after you sell. Despite all the emotional pressure, your higher cognitive functions are in control.
But that is often not true with clients.
Scientists tell us that the human brain has three parts, the cerebral cortex at the top (which makes us rational humans), the cerebellum below it (which has the intelligence of a rabbit, coordinates muscular activity and which makes us emotional creatures), and then the limbic brain at the top of your spinal cord, which controls fight or flight reactions.
This bottom nodule of thinking tissue has roughly the same intelligence as a lizard.
When humans encounter danger (and the recent market behavior certainly qualifies, particularly when it is also associated with a life-threatening pandemic and global economic shutdown), the mind instinctively retreats to the limbic brain. Which means that a client coming into your office may thinking with the intelligence of a lizard.
Here’s the point: What would happen if you tried to talk rationally to a lizard in your back yard? What progress would you make if you showed that lizard a spreadsheet or graph of past market movements? How much progress do you think you would make?
What do do? Your only option, in cases where the client is shut down by fear, is to ask the client to talk about what it feels like right now, and empathize (and you certainly can) with the feelings. As they talk, they are forced to use language, which pulls the locus of their awareness out of the bottom of the brain toward the top.
After the client has talked through the fear, and is able to function at the top of the cognitive hierarchy, then you can start to make the points that you need to make in this crisis.
Finally, think of the opportunities you have been given by this crisis to add value to clients’ financial lives. One advisor recently told me that he feels like a kid in a candy story harvesting tax losses for clients and reestablishing cost basis across the portfolio. Others are working on Roth IRA conversions at these lower valuations. And of course, Treasury bonds and cash can be redeployed at a time when stocks are on sale, giving portfolio returns a boost once we get to the other side of this crisis and the economy recovers again.
I hope that none of you were expecting me to tell you how long the Covid-19 epidemic will last, or to measure its long-term economic impact, or have any insights into when the markets will eventually recover. Of course I have no idea of any of those things—and nobody else does either. Those of us who have experienced three major downturns (and I also experienced the Black Monday crisis earlier in my career) remember how unexpected they were, how experts and pundits were caught by surprise, and how wrong they were when they tried to tell us what was coming next.
I only know one thing: which direction the next 100% movement in the stock market is going to be.
Above all else, practice compassion and look for ways to help others. If I can help YOU, please let me know. I’ve been writing articles about the crisis for my Client Articles subscribers, but I also think it might be worthwhile for all of us to pool together the messages we’re sending out to clients these days, and harvest each others’ insights and wisdom as a way to raise the quality and frequency of client communications.
Please accept my best wishes, my sympathy, and my support as you do the important work that you do for clients and your community. I know, and I hope you know, that your clients are lucky to have you.
See the antidote to falsely believing that this crisis was obvious in retrospect: http://www.bobveres.com/bob-veres-blog/the-false-assumptions-of-retrospect/