Hooper: "Yeah."
This Hollywood-influenced "fact" from Jaws is most likely the greatest remaining vestige of the movie still lodged in the memory of viewers--and I'm guessing the thought that kept the flight attendant out of the water evermore. The fact of the matter is that the majority of attacks (54%) happen in 24 to 36 feet of water. Attacks in shallower waters, such as those on surfers, are in depths of 6 to 18 feet. Not only do people get the facts wrong, the reports often come from unreliable sources.
H. David Baldridge, an expert on shark attacks, notes, "It was sobering to find that 89.9% of the files on human shark attacks, accounts of what happened were based primarily upon information supplied by persons who were neither the objects of the attacks nor were they even there at the time to actually see what happened. To be completely realistic, therefore, it must be conceded that the ISAF (International Shark Attack File) is made up largely of hearsay evidence, mostly documented long after the event happened." It should also be noted that, according to the Shark Attack Committee, the total number (108) of authenticated cases of shark attacks reported from the Pacific Coast of North America during the 20th century is "insufficient to determine the probability, or odds, of encountering a shark when entering these waters."
And yet there are millions who refuse to enter the water because they perceive the risk to be too great.
2008 and 2009 were real. I understand that. In retrospect, we now know, for those who ride out the storm, that greater damage was done to psyches than to portfolios. A 40% dip feels much worse in the limbic cortex than it does on a balance sheet. Today's investors can ill afford to be completely out of stock market waters. Their greater risk is in outliving their funds--and this likelihood becomes more probable if they are not willing to entertain a degree of market risk.
For your clients who have been completely scared out of the water, I would encourage a conversation that explores their experience through these tumultuous times. With the preface, "It's important for me to understand each client's best and worst investment experiences so that I can create a plan you are comfortable with," you could discover the same synapse-forming experiences by asking the following questions:
"What has been the scariest experience you have had as an investor?"
"What conclusions have you drawn regarding the events of the past three years?"
"Do you know any people who were ruined financially? How did it happen?"
An important aspect of this discovery is to learn which experiences were firsthand and which came by report from another source. Either way, via firsthand experience or secondhand processing, clients' synapse systems have been uniquely affected and you will be able to gain a clearer understanding of how they think and why they think the way they do. How are they properly interpreting their own experiences? Are they drawing logical conclusions from the stories they have heard? These are critical questions because misinformation and misinterpretation run rampant. By exploring both their experiences and their observations, you can help clients process their own investment thought patterns. It's much easier to manage the relationship if you know what experiences they have been through--as well as what movies they have seen.
Mitch Anthony is widely regarded in the financial services industry as an expert on building client relationships and has been recognized for his pioneering work in Financial Life Planning. His innovative tools for strengthening client relationships are available through his Advisor Insights at mitchanthony.com.