Turn Of The Screw

There are few more definitive tests of the character of a person, business or profession than how they respond to adversity. That‚s a trait that has always left me in admiration of independent financial advisors.

After attending several conferences in May, I was reminded of this indomitable spirit. Talking with industry consultants, brokerage executives and others who attended various conferences, they were all struck by the same phenomenon: Rarely have established advisors been more upbeat.

It‚s certainly not that their revenues or incomes are soaring. It‚s the way the sands are shifting beneath their feet. Clients seem to finally get it. Several advisors report that clients who have enjoyed low single-digit returns, either positive or negative, are thankful after hearing horror stories from their golfing buddies.

Some clients will say, "It‚s not your fault. You can‚t control the stock market." Others offer condolences and express sympathy for the toll a bear market can exact upon an advisor responsible for someone else‚s money.

It‚s a world away from early 2000, when Tom Grzymala of Alexandria, Va., found himself being second-guessed by a widow in her eighties asking why she couldn‚t sell all her Pfizer and put it in Cisco. It‚s ironic that even though most advisors enjoyed rising incomes during the final years of the bubble, many of them were miserable, thanks to Monday morning quarterbacking by clients caught up in the mania. The fact that most advisors seem far more content in these lean times speaks volumes about their character.

To be sure, advisors can‚t help but gloat a little about the hard times foisted upon those who played the bubble for all it was worth and fueled the public‚s absurd level of expectations. At an Undiscovered Managers‚ conference in Chicago in May, University of Santa Clara behavioral finance professor Meir Statman brought the house down with a rendition of a commercial from one bubble-riding online broker that taunted the financial establishment in the late 1990s. Now they are trying to play a different instrument, but their tone is off-key and out of tune. "Someone‚s going to win the Lotto. Just not you. It‚s time for E*Trade." Yeah, right.

It would be a mistake for advisors to draw sweeping conclusions from clients‚ newfound tolerance for minimal returns. As Judy Shine of Englewood, Colo., observes, "People still care about their money," even if their expectations are much more realistic. And other advisors told me that while clients are understanding at the present moment, their patience could wane if the financial markets continue to go sideways for several more years. Even if they remain sympathetic to their advisors, they could conclude that they simply can‚t afford to pay fees for asset management if they aren‚t getting more in the way of comprehensive planning services for their money.

What is happening is that Americans‚ psychographic profiles and attitudes towards money are changing as a result of the increasingly prolonged bear market and September 11. Advisors who want to prosper in the next decade need to be aware of these changes. For starters, I suggest you read articles in this issue by Tracey Longo on page 52, Deena Katz on page 75, and yours truly on page 79.