I was reading an article in the December issue of Investment Advisor that was addressing the dilemma that many advisors are feeling in today’s tough investment environment. Most are still counseling patience, but in the same breathe admitting that they have never really seem a historical precedent to what is occurring in the markets. The article contrasts the conflict between the head (rational judgement) and the heart (emotional reaction). What is interesting is the influence of the heart overriding the head- among the advisors. ” This is the ultimate stress test. The emotional quotient of what we are going through is arguably for most advisors at an all time high,” notes advisor P.J. DiNuzzo.
One reason for the increased anxiety, as if just watching the fortunes of your clients evaporate is not enough, is the entering of uncharted waters. Advisors are in a situation without historical precedence. ” I don’t think there is panic among advisors, just uncertainty.” While the past performance is not guarantee of future results, they are hoping that history will repeat itself, and investments will return to an upward trend. But, as any good advisor will tell you, no one knows for sure.
This morning I got a phone call from my RIA. Now this guy is so cool and calm, that he wouldn’t sweat in the middle of a forest fire, let alone an economic melt down. He was responding to a call that I put in to him on the wisdom of harvesting tax losses—and yes there is wisdom there. What struck me, was his candor—his admission that he had not seen anything like this before, that his firm had never actually harvested tax losses before, and that he could not be certain as to the direction of the markets or my investments. I gulped.
But I also realise that the reason I stick with him is that he is completely without guile, and as honest as the day is long. One of the advisors in the article wrote,” One of the things we are doing with clients is to remind them what their goals are and to keep the focus there as opposed to the immediate situation”. Another noted, “I think that what differentiates my clients’ perspective from others is that they have a tremendous amount of trust in what we are doing.”
And when I think to my conversation this morning, isn’t that what made feel comfortable telling my advisor to let it rip? Trust and planning. And keeping your head screwed on straight.