Investiphobia – Advisors get it too!

According to an article in today’s issue of Investment News, it’s not just the investor who suffers from investment fear.  It is often their advisor.  In an article entitled, Financial Advisors Face a Crisis of Confidence, Investment News writer Dan Jamieson addresses the “compassion fatique” that many brokers and advisors are currently experiencing.  Here’s a link to the full article,  http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090517/REG/305179978/1009/INIssueAlert01&uid=30265  The term “compassion fatique” was originally intended to describe medical personnel, including nurses, doctors, and anyone who deals with the terminally ill.  Evidently the trauma of the current market conditions are causing casualties across the world of professional investing.  And, maybe that is to be expected.

But would you have expected 80% of affluent investors to be “disgusted with their adviser because their adviser is spooked”?  The  Investment News article quotes consultant Matt Oechsli, president of the Oechsli Institute Inc. in Greensboro, N.C., who stands by that figure.  For those of you that prefer fractions, that means that four out of five wealthy investors are disgusted with their advisor.  If you wondered what a wake up call looked like, look no further.

It is natural for anyone to be concerned in the current market, but it is an indictment of my profession that so many brokers and advisors are being affected.  Let’s look at other fields.  How about transportation?  If you are on a plane and there’s turbulence or a ship in heavy weather, don’t you expect the captain and crew to be confident and reassuring?  Not just for show, but because they have experience, knowledge, and everything they need to know to make it to their destination.  

And, maybe that is the issue.  Many brokers and advisors may have the academic training but lack the experience to handle the first decade of the 21st century.  Half of the past ten years will probably end up negative.  Tough environment if you started with your first client in 1999 or even more recently.

The second issue is the amount of new products and complicated money management methods that have been introduced over the past 10-20 years.  There are books on the bestseller list that talk about the end of Modern Portfolio Theory, Asset Allocation, etc.  When tried and true portfolio methods, like these, are discarded in favor of hedge funds, derivatives, and other really neat sounding products, it shouldn’t surprise anyone that the professionals who foisted this change on their clients are feeling “fatigue”.  Particularly after the tech bubble bust, the housing crisis, the sub-prime mortgage fiasco, auction rate securities…  Ouch!

As an industry, professionals need to return to basics.  There are many good things to consider, even in the current market, but not when you have lost confidence.  Clients will gradually force the industry back to solid investment management methods.  Until then, for many advisors, the path is going to be rocky!  If you are a do-it-yourselfer, you might want to consider that advice as well.

If you work with an “advisor”, make sure that they really are advisors.  The second half of Investiphobia contains a comprehensive, but easy to read, review of the differences between brokers, advisors, and other professionals in the industry.  In this environment, I highly recommend that you avoid the commission “financial advisor” in favor of a professional that works with you on an ongoing basis with no incentive to “sell” anything.  This isn’t the time for creative new products.  Solid advice, careful and diversified asset allocation, and long-term commitment will see us through this storm.

Focus on living, not investing.  My bet is that you and your portfolio will both benefit!  And, as I say in the book, remember:

Money is not your life.  It is simply the means to the life that you want.

 

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