Hardly a day goes by that we don't see or hear at least one story about the stock market plunging, soaring or faltering. As banks fail, real estate crumbles, bonds and CDs stagnate, those fortunate enough to have a few dollars invested in the stock market edge ever closer to the edge of their seats.
The world's nervous investors sit glassy-eyed, staring at the financial cable channels, poring through the nether pages of the Wall Street Journal and Investor's Business Daily, while fretting over apocalyptic warnings that they have missed forever the chance to invest affordably in gold.
Eventually, most lunge sweaty-palmed for the phone and call their stock broker or personal financial advisor. And guess what? Not only is their call not a surprise, the advisor has been expecting it and is ready with soothing words.
Of course, some financial advisors have always been more salesmen than objective advisors. (A few have been Ponzi artists, but that's a topic for another day). But in today's roller-coaster economy, nearly every financial advisor has been forced to learn the techniques practiced by psychologists, grief counselors, priests, ministers and rabbis.
When the news is bad about jobs, and a possible double-dip recession, the old fears rear their head, said Jane King, president of Fairfield Financial Advisors Ltd.," in a recent issue of Investment News, a trade publication for financial advisors.
King recounted a calls he received from a nervous client in his 60s who had been fretting about the risks to his $2.7 million portfolio. She reminded him that his investment included such premier stocks as Anheuser-Busch, up 24% since last September.
He wouldn't have made a return even approaching that in bonds, King said.
The situation can be at its most perilous with older consumers who have worked hard, attained a high standard of living and accumulated a sizeable nest egg despite -- or perhaps because of -- growing up with memories of the Great Depression, when cash was king.
Fearful of outliving their assets, it can be difficult for these older investors to resist the temptation to pull their money out of stocks and stash it under their bed or in insured bank accounts, which amount to about the same thing.
Most armchair investors don't consider themselves experts but still have trouble putting their full faith in their financial advisors despite what may be years of stellar portfolio performance through good years and bad.
While it's true that the financial markets are confusing, it's still true that over the long-term, a balanced and diversified portfolio outperforms just about any other legal investment activity. Ideally, you want to be buying on the way up, selling on the way down. A good financial advisor can help you get it right, at least most of the time.
"Ultimately, it's all about education," said Anne Field, writing in Registered Rep, another trade newsletter. "Perhaps the most important thing you can teach them in your early discussions is how inflation will affect their portfolios if they don't take any risks."
Taking it seriously
Don't think financial advisors aren't taking the nervous investor phenomenon seriously. The Financial Planning Association recently sponsored a continuing education event for its members entitled "Retirementology: Rethinking the American Dream."
Topics included "relationship skills, communications skills, critical thinking" and promised to explain "how the role of the advisor is evolving to become more comprehensive."
All of this may sound familiar to doctors, lawyers and other professionals who in recent years have had to deal with the "consumerization" of their practices and to go beyond cultivating a good bedside manner. They've had to learn to probe patients' and clients' fears and biases and to more fully explain their methodology, qualifications and previous successes.
It took patients and legal clients a long time to become assertive, to ask questions and challenge authority. Now it's time for investors to do the same -- to politely but assertively question their advisors' advice, qualifications and methods.
Chances are, your advisor is doing a good job but the job description now includes keeping you well-informed and comfortable.
Whatever your financial advisor may achieve with your portfolio, he or she also owes you the time and respect to answer all of your questions, to hold your hand and explain clearly and unemotionally the likely consequences of the various investment options open to you.
If you're not satisfied with the results of your advisor's efforts, both fiscal and psychological, it may be time to look elsewhere. Fred Yager outlines what to look for in his article, "Is It Time to Fire Your Financial Advisor?"
If you don't have a financial advisor or are thinking of making a change, one good source of information is the National Association of Personal Financial Advisors, which has an online directory of fee-only financial advisors. (A fee-only advisors charges you for his service and takes no commission from products she represents).
Chances are, if you've accumulated a hefty nest egg, you've learned to find the best possible professional help and to delegate appropriately. This is no time to forget those lessons.