Wall Street Steward Blog

The Advisor Protection Program

The S&P 500 dropped from 1,287 on August 1 to 1,119 on August 8.  In just 5 trading days, investors suffered a loss of over 13%.  Since 1990, this is only the fourth time the overall market has lost more than 12% in just a few days.  Three of those times occurred in 2008*.

An astute investor knows that market pullbacks are temporary, and that if they have an overall investment strategy being managed by a professional, they will be just fine
The problem is that when these types of corrections occur, even the most sophisticated investors find themselves feeling like scared little mice….they too want to take their money and run.  We, as professional financial advisors, have absolutely NO control over the performance of the stock market, but we do have control about how we interact with clients.

The truth is that our jobs are E-A-S-Y when things are going smoothly.  In a raging bull market, everyone thinks they are a genius, and clients are less likely to complain about “relative” performance (“I only made 10%, but the market made 13%”).  However, when a major market correction occurs, this is when clients need us the most.  Our job is very difficult to do when the sentiment becomes “the sky is falling” but that is when clients expect us to be at our best.Consider this analogy:  Game 7 of the World Series, bottom of the 9th inning, your team is down by a run and the tying run is at third base.  Half the planet is watching and the lights have never been brighter.  You are facing a closer that throws a 106 mph fastball.  The count is 0-2, and thousands of light bulbs flash on every pitch. 

HOW will your advisor react?  Do they have what it takes to look that closer in the eyes, work the count, foul off some tough pitches, and then line a base hit into CF to tie the game?  Or, will they wail away at strike three and then watch the other team celebrate?I can only speak for myself, but I believe that during uncommon times, it is time to step up my game.  For every client, there were daily market opinions on my Facebook page, real time updates on my Twitter feed, and every single e-mail was answered the day it was sent.  For my top clients, we booked face to face meetings immediately.  When do they need to hear from their advisor?  If not now, then when?  One of the toughest things to do is to look someone in their eyes and apologize for losing their money.  I take it very personally.  I see it as a competition, and if I lose their money, I lose the game.  However, when the game is lost, it takes someone with grace and elegance to stand and answer every reporter’s question about that failure.  That is my job, and that is why clients pay me.    

If this recent pullback has morphed you from affluent investor into scared little mouse, then consider what your advisor said to you when he/she called you to hold your hand – assuming they did call.   

As you are finishing up this article, ask yourself this question:  do you want the person who is going to fade under the bright “World Series lights” or do you want the clutch performer?

You have undoubtedly worked hard to save your nest egg, and you deserve someone that will not hide from you when times get tough. 

*sources:  Yahoo Finance, LPL Financial Research – Burt White