Smart advisors know that their first responsibility is to help clients understand and perceive what's going on, and advise them how to take advantage of it. Ask them the following questions: "Do you believe that people do smart things with their money in a panic?" "Do you believe that when people are afraid and decide to hide in a cave, they might be missing out on some good opportunities?"
During times like these, capitalists capitalize. They capitalize on what fear leaves behind. They capitalize on the fact that people no longer believe that capitalism works. They capitalize on what panic leaves behind. They capitalize on the fact that everyone is following someone else.
Let's not be so quick to throw out the baby with the bathwater. Capitalist thinking created this great culture and will certainly play the leading role in restoring our markets. Good ideas and hard work still lead to profit. Do you believe that? Companies that exercise common sense and don't mortgage their futures will survive and thrive. Do you believe that? Most people are too afraid of being out of step with the herd to stop and examine the difference between a failed investment and a failure to invest.
The World Book Dictionary offers the following definitions of the word "panic":
1. A fear affecting an individual or spreading through a whole group of persons or animals so that they lose control of themselves; unreasoning fear
2. An outbreak of widespread alarm, as in a community, over financial or commercial matters, which tends to demoralize judgment and lead to hasty, ill-advised measures to avoid loss
If we recognize that the herd is foolish (we do); if we know that people don't think clearly when they are afraid (we do); and if we acknowledge that human nature does the wrong thing at the wrong time (again, we do)-then there is only one intelligent response: Capitalize on that knowledge, and help your clients do the same.
©2009 Mitch Anthony. All rights reserved. Mitch is the president of the Financial Life Planning Institute and Advisor Insights Inc. He is an industry leader in training advisors on building life-centered relationships. His numerous books include The New Retirementality and Your Clients for Life. He can be reached at [email protected].