One year ago, 9/11 shook our sense of security like nothing else we'd ever experienced. Since then, the S&P 500 and the Nasdaq have ignored good economic news to continue their plunge to five-year lows, company after company has admitted cheating on earnings statements, and billions in shareholder value has vaporized while top executives waltzed off with millions in compensation. Stock analysts have shilled for investment bankers; trusted clerics have been revealed as pedophiles.
It's no wonder so many people are losing faith in the trustworthiness of the institutions on which we all depend. Is there a way to help your clients regain a sense of balance, trust, and hope? Read on for some ideas.
I'm deluged with calls from clients wanting to dump all their stocks and move into gold or real estate. I've encouraged them to keep the faith, but it gets harder and harder as the market keeps falling. I feel like King Canute trying to sweep back the tide with a broom. What more can I do?
My first suggestion would be to define for yourself exactly what your philosophy and outlook are. What do you believe is the wisest action to take in the midst of this maelstrom? If you have general guidelines to share with all of your clients, state your perspective in an e-mail or letter to them.
Begin by letting them know that you understand why they feel so shaken, mistrustful, and uncertain about how to proceed. Try to reassure them about the future without being unrealistic. For example, you might suggest broader diversification, noting that the great majority of companies play by the rules. If you have taken steps with your own portfolio, you might share your course of action as a way to reinforce openness and trust. You could also point out positive signs of change, such as Coca-Cola's and The Washington Post Company's decisions to clean up their earnings statements by treating stock options as a compensation expense.
Dick Vodra, a financial advisor in McLean, Virginia, and author of the superbly commonsense guide Enough Money (Xlibris, 2001; available through www.investmentadvisor.com), recently wrote an excellent letter of this type. A suggestion of his that I particularly like was for clients to use some of their assets to build up their "career development fund." This fund can be used for workshops, continuing education, improving skills in their existing line of work, or exploring a new field–anything that broadens their employability in this rapidly changing world.
Once you have written your clients about where you stand and how you think they should proceed, follow up with individual conferences to revisit their goals and needs. Whether these meetings are face-to-face or over the phone, don't try to rush clients into action without hearing and addressing their feelings of fear and disillusionment. If you give them time to share their concerns, you'll help calm them and reassure them of your dependability at a moment when everything else seems to be changing around them.
When my client wanted to sell his telecom stocks last year, I recommended that he hold onto them. Since then, he's lost a bundle. He says that after this experience, he finds it hard to trust my judgment. Should I address this with him, or just let it blow over?
I feel for you–he's certainly put you in a tough position. I think it would be a fine idea to conciliate him, perhaps by inviting him to lunch at a good restaurant to acknowledge that you truly regret his losses. (If you lost money too, let him know he wasn't alone.)
But don't grovel unduly. Even the smartest analysts in the business were misled about the strength of some of these companies' earnings. To make sure he doesn't heap all the blame on your shoulders, you may also need to remind him that while your recommendations are based on your best professional judgment, the ultimate decisions are always up to him.
Finally, remind him of the contributions you have made in the past toward his financial security and peace of mind. Ask what it will take to restore his trust in your advice, which for the most part has served him well so far.
By encouraging him to remember the advantages of working with you, you may succeed in bringing him back to a more balanced perspective in assessing your relationship. Once he is given an opportunity to fully express his sense of loss and disappointment, he may be able to move past these feelings to continue honoring your expertise in the future.
A single mother who has consulted me seems to be deeply upset about her abrupt job loss. Although it was a result of company-wide layoffs, she told me she feels personally betrayed and keeps reliving the scene where she was let go. She's aware of the need to make financial plans, but her response to my suggestions is either apathy or rage at the unfairness of the CEO's pay raise while she and many others lost their jobs. I'm not sure how to deal with this. Is there a way I can help her get moving?
