Financial Advisors - The Blind Lead the Blind

Hi Fonz,
Excellent email and something I strongely endorse.
My quick comment, as a fund manager trading through a “Black Swan” moment; don’t think your tools that you have calibrated so exquisitely over the last number of years are going to do the job in this market. By doing more of the same you are allowing in fact more randomness into what many call a randomly performing industry.
In times like these one needs to listen to the wise counsel of those that have encountered the truly ugly Black Swan.
My only advice to colleagues and friends not just in these times but through all times, never “blow up”. Look after your capital, don’t let any financial advisor tell you it is impossible to time the markets so you must just grin and bare it. No, you need to define in your mind before the game begins what you consider is a “blow up” once you have that stated objective in mind, it is up to you with your advisor to ensure that it never happens.
The advisors I am encountering are all reactionary and hide behind the relative performance baloney by telling their clients that they lost a little bit less than such and such a fund, but what about the persons overall wealth. If the investor is down 50% he or she needs to return 100% in the future to make them whole. What about advisors taking a holistic look and saying your wealth at time 0 was X and now at time 1 it is Y, if things carry on like this you are going to lose more wealth lets rather do the following.
The industry has been due a shake up, and just like the free market even with all the government intervention will expose all the weak spots in the economy so to will this financial maelstrom clean up the financial advisement industry that for all its regulation is an example of the blind leading the blind, and conflicted in all the wrong places.
Catch you later have a good fast.
Mickson

From: The Peer Effect [mailto:info@thepeereffect.com.au]
Sent: Wednesday, 8 October 2008 9:45 AM
To: michael@velocity-trading.com
Subject: Ideas Email No. 32 - It's not business as usual
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Dear Mickson,
Over the last few weeks I've had the opportunity to speak with several advisers to canvass how they are reacting to today's dramatic financial environment. Almost to a person they have replied 'business as usual' or something similar. They tell me that their clients understand what's happening, that their clients are invested for the long term; that they have educated their clients in anticipation of just such a scenario.
Is this possible? Is this panic a media event? Are most investors, particularly your clients, sitting pretty waiting for the shake-out to end? I doubt it. Human nature is what it is. We are prone to doubt ourselves when faced with adversity. We are programmed to swing between greed and fear. We are strongly influenced by common wisdom and the action of the herd.
I understand the importance of a brave face and confident demeanour at these times. The last thing your clients want to hear is a quaver in your voice and uncertainty in your words. But it is definitely not business as usual. By all means show a steely resolve, but it's time for action.
Here are some ideas...
Your Clients
You should be in regular contact with your Segment 'A' clients. They are hearing and reading things that challenge the messages that you have given them. You may have clients who prefer to ignore what's happening. That's fine and you can cross them off your list. But many will seek your reassurance.
Before you telephone a client, jot down three key points that you want to communicate. These points should be relevant to the current situation, not an 'invest for the long term' mantra. Your clients want to know that you are abreast with current developments and have an opinion.
There is a lot of thoughtful opinion and commentary that can be attached to emails. Use email to augment your Segment 'A' contact and as an efficient way to communicate with the rest of your client base.
You need to be careful that this increased communication (although sorely wanted by many clients) does not suggest any panic on your end. Use phrases like 'I'm going to be in contact with you more often while this market volatility lasts. We all know that it will end but I appreciate that the journey can be a bit scary'.
Manage your centres of influence in the same way you do your Segment 'A' clients.
Your Staff
Make no mistake. Your staff are feeling the strain. They may have money invested themselves. They may have introduced family and friends to your practice and are worried that relationships may be damaged. And most of all, many young people and new entrants to our industry may have never experienced an environment like this. They may be entertaining doubts about the value they provide and even whether they have made the correct career choice.
Make some time for one-on-one chats. Deal with issues before they flare up. I wouldn't suggest any group activity here - any negativity can be magnified and there's always the possibility that sensitive issues aren't communicated.
Yourself
By all means show your clients and staff your nothing-can-rattle-me visage. But be honest with yourself. I have a few very close friends in funds management and I can see the strain they're going through. At least they have business-to-business relationships. These are usually a lot more practical. You have mainly business-to-client relationships which are more emotional.
Here are some specific actions that will enable you to manage these times:
Drink more water. Stress releases toxins. These create fatigue and illness. Water assists your body to flush out toxins. Don't skip meals. Now is not the time to neglect your physical well-being.
Share your feelings with a close friend or confidant. Our mind is capable of creating all kinds of nightmarish scenarios. And most of our self-talk is negative. Verbalising and sharing your thoughts often puts things in perspective.
Do some exercise every day - even if this is just a ten minute walk outside your office. Try and get some time in the sun. Sunshine releases brain chemicals which improve your mood.
Redo your budget. Unless you planned for the scenario we are going through, you are well behind your objectives for this year. I spoke with an ex-colleague of mine last week and he remarked that he was 'only 65% of budget'. This can only be demotivating and stressful. So rework your own plan and those of your staff (or if you do not have the time at least communicate that we are going through challenging times and in these circumstances missing targets is understandable).
The collective wisdom of the group...



The Ideas Email is much more than a weekly email. As a subscriber you are part of a virtual community of financial advisers and people who work with advisers. Up until now I have done all the talking. I'd like this to change. If only for one powerful reason: so that you can access the collective wisdom of the group.
I would like you to share any action that you are currently taking to manage today's challenges that has produced great results. Please email this to me and I will consolidate your replies and report back in next week's Ideas Email.



It is not business as usual in the financial services industry. These are epochal times. Let us recognise this and act accordingly.
I wish you great success in your business.
All the best,