Investors need inner calm when deciding course of action with their financial advisor
Arthur Dent, an unsuspecting galactic traveler in Douglas Adams’ The Hitchhiker’s Guide to the Galaxy, comes into contact with an all-knowing cosmic encyclopedia that helps with the in’s and out’s of the planets and species he comes in contact with.
Most investors today can probably relate. Investing in the markets lately has felt like being transported to another universe; one where we could use a copy of that Arthur Dent’s guide to make sense of the landscape to steer our investment plans back to something resembling ‘normal’, despite the new environment.
And while the results of the last year have been shocking, what might serve us just as well as having an all-knowing guide to the investing universe may be the simple message printed on the cover of the fictional universe guide:
Now, after losing a quarter or more of the value in your investment accounts, you might be thinking that this sounds like just another rah-rah article to stay the course, keep the faith, and invest in the markets. I’ll admit, that is my long-term bias, if suitable, but I also want to address a concern I have over the choices many investors are facing when meeting with their advisors.
So let’s start by stopping for a moment to consider the following … when have you ever achieved anything in life by letting your fears decide the action you would take?
If you ever did let fear take the reins, I’m fairly certain the outcome wasn’t your most desired result. It is more likely that whatever your goal, the end result was not to your liking.
As it relates now to your present portfolio crisis, you may have thought your portfolio was inching closer to that ever elusive retirement target, whatever that may have been. Now when you open your statements, all you can think about is the extra years of work that may be needed to get back to the values you saw a year ago.
So, you are rightfully panicked. It’s ok to admit. Anyone with a portfolio is. However, you are proactive and always valued professional advice, so you are taking your concerns to your financial advisor.
Even so, the questions you have you realize don’t have an answer; ranging from why didn’t they advise you to move out of the market before the drop, to what are the signals that will tell them the market has turned, to what will give the best results over the next few weeks, months, or years.
You meet with your advisor and discuss the changes you want to see in your performance, knowing full well what the good advice is – stay the course, add to those investments that are down, and rebalance into stock investments.
Knowing what your advisors advice should be, let’s change the scenario for a second to test that advice versus your own professional experiences.
Your boss or best client asks your opinion on a difficult decision. You know what you want to say, and you know what’s in their best interest.
On the other hand, you also know what they want to hear from you.
Let’s beam back to your investment meeting –
The proposal from the advisor feels like what you want to hear. She recommends moving your investments to a new, untested strategy using the latest Wall Street product.
Can you guess my advice to those facing this dilemma?
First, take a deep breath.
Then, take a deeper breath. And don’t panic.
However unfortunate, the above scenario is happening in many meetings families and individuals are having with their financial advisors. If you are faced with the above scenario, try to remember a few simple truths before agreeing to any changes:
-Realize that your advisor may also be panicked. After all, their income is lower as your portfolio as gone down. In addition, they are working more, and their business may be running at a loss or require staffing reductions. They are feeling the same stress you are.
The point here is simply that your advisor may be more likely now than in normal times to give in to requests they may not have before due to new circumstances if it means keeping your business.
-Many Wall Street creations are purposefully introduced after cycles when that particular strategy earned above average returns (of course, had Wall Street had foresight enough they would have put out that product years beforehand).