We seem to have a “crisis” somewhere, in someway, all the time -- Greek debt, debt ceiling, fiscal cliff, and the recent “taper tantrum.” The Fed stated the economy was better and might not need as much help in the future, so it was prepared to taper its efforts to keep interest rates low if things continued to improve. This news led some to dump stocks and bonds and even gold in June, hence the tantrum.
Part of the value that we provide clients comes from our ability to take care of details on their behalf, thus freeing up their time and energy for other matters. When it comes to news, we often hear, “I don’t worry about that. That’s why we have you.”
The press, however, loves to assume that whatever the headline of the day may be, advisors are crazed by an effort to call clients to discuss it. Though this is usually not the case, remaining silent can be a problem because it leaves people to wonder. Often when we do not know what is going on, we create stories in our minds about what or why something is happening. Our stories are rarely correct. The last time a friend did not return your phone call promptly, odds are you concocted a story explaining the lack of call back and the actual reason was something else entirely.
The hub bub about the taper tantrum reminds me of some of the events of 2010.
“What is going on with the market? It is down 500 points,” one of our team asked.
“Really? 500 points?” I responded.
I had to look for myself. Down 800 points, actually. Yikes. I felt my blood pressure rise instantly and thought, “Oh man, not again.” It was May 6, 2010 – the flash crash! That was a good name for it because the markets bounced back as quickly as it collapsed.
You remember that blast from the past don’t you? I do because I found the difference between the media frenzy about it to be the polar opposite to the reaction of our clients. The only phone call I got was from a reporter wondering how clients were reacting and what we were recommending clients do now.
When the story posted on the publication’s Web site the next day, the piece included quotes from a few advisors who were scrambling to put out communications to their clients, but mostly it was full of pundits trying to explain it. Many blamed a “fat finger” for the drop. The pundits made this explanation with enough confidence that one might think they witnessed the action directly.
Despite the novelty of the drop and bounce back, we did not rush to put out a comment to clients for several reasons. First and foremost, clients were not clamoring for answers. A week after the flash crash, that reporter was still the only call I had received about the incident. In all conversations with clients that week, I had to bring the subject up. Firm-wide, only a handful of clients called with any worry.