When the stock market hits a speed bump, financial advisors regularly calm nervous clients and encourage them to stay the course. But customers aren’t the only ones seeing their wallets sink. Advisors are also losing money. They follow the same investment principles they preach to clients – and share their plight in turbulent times (like now).
How do investment professionals deal with steep declines? “Advisors should lead by example,” said Daniel Yerger, certified financial planner at MY Wealth Planners in Longmont, Colorado. “Part of that is showing the brave face of clients and public needs when applying a disciplined investment process.”
Yerger doesn’t just empathize with customers as their losses mount. He lets them see his pain. About four years ago, he had an idea: he bought a glass display case, put it in his office, and filled it with his financial statements for all to see.
He regularly replaces his old statements with new ones. Examples include his brokerage accounts, 401(k) statements and cash value life insurance policy. Yerger’s commitment to what it calls “aggressive transparency” strengthens its bond with its customers. They see that he is suffering with them.
Advisors who disclose their declining assets signal to clients that everyone is in the same leaky boat. But it still stings. “We are not immune to the same emotions that affect our clients,” said Michael Reynolds, adviser at Elevation Financial in Westfield, Ind.
Advisors often adopt the coping mechanisms they suggest to clients, such as seeing their portfolio over a longer period of time. For example, the S&P 500 SPX,
has produced average annualized returns of around 10.5% over many decades – despite wars, a pandemic and other calamities that trigger short-term meltdowns.
They also urge clients to avoid following daily market fluctuations. Leland Gross, a certified financial planner at PeaceLink Financial Planning in Virginia Beach, Va., avoids checking his account frequently during severe market slumps. He advises customers to do the same.
“I know I don’t touch that money,” he said, so there’s no need to count how much disappeared on any given day. “With goal-based planning, I know what that money is for, when I’ll need it, and what it’s for.”
Still, Gross acknowledges that there’s no easy way to persevere as your account balance erodes. He cites the first month of the pandemic in 2020 when the market fell around 34%. “March 2020 was particularly stressful,” Gross said. “The whole world was shutting down. Little did we know it would be a quick downturn.
Today, his stick-to-plan mentality is helping Gross and his clients weather the storm. “But it still shocks me when I look at my account and see how far it’s gone,” he said.
In addition to taking a long-term view, advisors react to heavy losses by refusing to berate themselves for past investment decisions. Jarrod Sandra, certified financial planner at Chisholm Wealth Management in Crowley, Texas, doesn’t dwell on what he could have — or should have — done to avoid losing money. Instead, he says to himself, “I have made my decision. Don’t stress about things I can’t change. Apply what I learned and move on. For example, he no longer buys individual shares for his personal account.
Yet part of a market downturn still upsets Sandra: he wishes he had even more money to invest. He said: “I’m actually more pissed that I can’t put more on the market at this point.”
After: Why are Americans so grumpy about the economy? They’ve never lost so much purchasing power in a year as the stimulus dries up and inflation boils over
Read also : What’s next for the stock market after the worst first half since 1970? Here is the history.