I was on a flight from San Francisco when turbulence startled the flight attendant carrying drinks to the seat across the aisle. She performed an airborne impression of a surfer and managed to serve the drinks without spilling a drop. I remarked that she "must have been quite the surfer" and she quipped, "I was ... until I saw the movie."

She noticed my quizzical brow and leaned in to explain, "Jaws. I grew up on and in the ocean, but after I saw that movie, I never went into the water again."

In a flash I understood a problem of the modern investor and the challenge before today's financial advisor. Some people have had real near-death experiences but others have had imagined experiences that seem very real. Both types of experience have the potential to scare people out of the water--forever. It makes no difference to the human brain whether it really happened. There are millions of investors who are no longer willing to "enter the water," and I fear that for the vast majority it has more to do with the "movie" than it does with their actual experience.

As cliché as, "You don't lose until you sell" sounds to some, at the nucleus of that old phrase is an atom of truth. If your balance in 2011 resembled your balance in early 2008, you lost three years--but you didn't actually lose any money, unless you sold out of panic. There were those who lost fortunes that they never recovered, but the vast majority of big losers were those who sold at the ebb of fall of '08 to the spring of '09 and parked their boats in the shallows of rock-bottom savings accounts. The actual damage for most 401(k)ers was only on paper and the majority was, for the most part, back in the black sometime in 2011. The statements of 2008-2009 now float like so much flotsam on the sea of troubled memories. For many of us it was not real and permanent damage but imagined--as time would demonstrate. But at that point of time, it seemed like the world was going to end.

Look at your clientele and ask how many were actually devoured by sharks and how many were simply petrified into inaction by the accompanying drama. In a panic, the masses are titillated toward survival instincts. They see the fin protruding out of the water and they run to the shore. As Mayor Vaughn in Jaws said, "Martin, it's all psychological. You yell barracuda, everybody says, 'Huh? What?' You yell shark, we've got a panic on our hands on the Fourth of July." In this business, we need a clearer understanding of how the investor's brain processes traumatic events--in real life and as it gets filtered through the media by pundits who are addicted to yelling, "Shark!"

Every emotive experience we experience in life plays a role in paving new highways of thought in our brain. These patterns of thought circuitry, informed by electronic and chemical release and forming neural connections called synapses, are the chief catalysts for all decision-making in life. Synapses allow neurons to form circuits that make up our central nervous system, that system which controls our physical and mental functions.

By understanding these paths of thought and how they were formed, we can fairly well predict behavior in certain circumstances or situations. Clients' decisions or indecision will follow the circuitry in their brains, formed by definitive experiences. Previously formed synapses are biological computations that drive our perceptions of situations and our controlling thoughts in decision-making.

"What you've got here is a perfect eating machine. It's a miracle of evolution. It does nothing but swim, eat and make little sharks."- Hooper (the shark expert in Jaws)

My wife doesn't eat fish because she choked on a bone when she was 3 years old. Now her throat clenches at the mention of eating bonefish. This is an example of how the circuit of thought and biological response functions. Synapses are like idiosyncratic road constructions that determine the direction of thoughts in each individual's brain. The adult human brain is estimated to contain from 1014 to 5 × 1014 (100 trillion to 500 trillion) synapses. Don't worry ... you don't have to understand all 500 trillion synapses driving your clients' behaviors, just a couple or three that are driving their financial decisions. Behind the behavior you observe, whether it is a poor decision or the lack of decisiveness, is a formative experience or two. If you want to influence clients' behavior, you'd best learn about those formative experiences and the conclusions they have drawn from them. While you may not persuade them to eat halibut, with some education they just might get comfortable with the lobster bisque.

Brody: "Is it true that most people get attacked by sharks in three feet of water about ten feet from the beach?"