The pandemic should have instead been an opportunity to help ourselves and our clients become more comfortable with flexibility and uncertainty.
One of the most difficult things we had to do over the last year and a half was help clients regulate their emotions. People were anxious. In his book Unwinding Anxiety, psychiatrist Judson Brewer shows a simple formula: fear + uncertainty = anxiety. I would like to meet the person who experienced no fear or uncertainty over the last two years. (Actually, I wouldn’t.) Brewer also points out that “the spread of emotion from one person to another is aptly termed social contagion.” The pandemic was about airborne pathogens, but the most infectious thing was Facebook! When clients were anxious, telling them they shouldn’t be was unproductive.
One of the biggest challenges for planners is to not get clients to act against their best interests when they’re anxious. While selling out of a declining market may have given them immediate relief from those anxious feelings, advisors taking such actions would not have been serving the clients well. It was more useful to walk them through the situation—so that when they got the anxiety trigger (“The markets are going to zero”) they could change their behavior (“The markets are falling, so it might be better to rebalance”) which would likely have led them to a better conclusion and result (“I’ve done something. It may not work right now. While I don’t know the direction of the next 50% market movement, I know the direction of the next 100%.”) In other words, we have to help clients change their story about what is happening, not just ignore their anxiety and hope for things to improve.
The virus is not over, so we are not done learning. I think the most useful thing to understand is how you managed yourself through the last two years, rather than how you managed your clients. The story has not been completely written. But make sure you have some influence over the plot.
Ross Levin is the chief executive officer and founder of Accredited Investors Wealth Management in Edina, Minn.