Flawed Market Crisis Advice
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
You’ve trained your entire professional life to deal with market crashes. You scrupulously know the data. You expect clients to call you worried, anxious and distraught.
You feel supremely confident in your ability to allay their concerns.
Unfortunately, the premise underlying your advice may be flawed. You might be doing them (and yourself) a terrible disservice.
Advice is often unwelcome
Giving advice is highly pleasurable – for those giving it. I know. My entire life has involved giving advice for a fee – initially as a lawyer, then as a financial advisor, coach to advisory firms and author.
If you were in a supermarket and observed a child misbehaving, would you volunteer parenting advice to the caregiver?
Of course not.
Giving unsolicited advice is almost always inappropriate. Giving solicited advice often stands on the same footing. Just because someone calls and expresses concern doesn’t mean they’re looking for advice. They may have an entirely different agenda. Yet, because the role of “all knowing guru” is such a positive experience, we tend to assume our advice is being solicited and immediately start dispensing it.
Data doesn’t persuade
Once we are on a roll of giving advice, what’s the advice we dispense? Typically, it’s data-driven.
There’s a lot of data on past pandemics. For example, we know that within six months of the start of the swine flu, the S&P 500 rose 18.72%. Surely, that would be comforting to anxious investors, right?