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Under Pressure

We owe it to ourselves and to our clients to do something now to prevent stress from causing us to make poor decisions in the future.

Carl Richards, 08/22/2013

This article originally appeared in the August/September 2013 issue of MorningstarAdvisor magazine.  

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.

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.


The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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