Investor Anxiety, Or Dancing Like No One is Watching

My youngest daughter, now two, loves to dance.

I call it dancing.  You might call it jumping up and down, or swinging back on forth, hands on hips.  A pint sized Beyonce.

There’s nothing like watching a child dance, uninhibited, without fear or anxiety.

Unlike adults, kids aren’t conditioned through experiences to be reserved, to not “dance.” 

I have read a few articles lately about investor anxiety, which I confess made me a bit queasy.

And while I didn't reach for the Pepto Bismol, I did take a nice walk with the doggies. 

Advisors enter client interactions with “blinders;” preconceived notions about what they think based on what we know about them, and, perhaps more importantly, our own experiences with similar people.

That's what advisors get paid for, experiences.  Clients want experience, just like you wouldn’t want to tackle rewiring your home with a textbook as your guide. 

Today’s investors are sophisticated.  They have read up on my firm, and me, before we meet, and have a much better sense about market activity than they did even ten years ago. 

But experience can work against you if you lack balance. 

Both clients and advisors are prone to decision fatigue, a behavioral finance concept which suggests that the more difficult decisions in a row you have to make, the worse your decisions get.  I have also had prospective clients whose difficulty is realizing that indecision, doing nothing with their portfolio, is an active decision. 

When dealing with client anxiety the best approach is to allow room for doubt.  Like any relationship, it's best to check ourselves and not be afraid to ask the question, "Are you looking for solutions or for me to listen?"

In 2008 a number of client discussions felt more like therapy sessions.  They shared, I shared, and we persevered.  I allowed plenty of room for doubt on both parts. 

One client, an elderly widow, became convinced the market could “go to zero,” which to me was more about her risk tolerance than fortune telling.  Her low-risk portfolio was positioned to sustain her lifestyle, first and foremost, with the “risk” portion targeted for her children and grandchildren. 

We live an “overload” society, or as teenagers say, TMI (too much information).  For example, I have two high school freshmen living with the insanity of online grade access.  For parents, it's the equivalent of being strapped in the front car of a roller coaster.   One day, your kid is getting an "F" until, suddenly, the teacher adds back missing homework, bringing them magically back to a "B" until, alas, another botched assignment drops them back into the danger zone.  

For today’s investor, daily viewing of the markets must produce the same sensation.  

Sometimes it's best to look the other way. 

If volatility is here to stay it's up to advisors to stay focused on the end of the ride (long-term money goals), instead of the daily ups and downs. 

How do you deal with market anxiety?  I would enjoy hearing from you via written comments or you can reach me directly at 630-545-3653.