What do you get when you stare very intently into the fog? Frustrated, no doubt. When the fog rolls in, or a huge rainstorm hits, visibility is decimated.
This summer, investors have been forced to endure lots of fog and repeated storms, creating unprecedented volatility. And that's when the job of financial advisor becomes so vital. Weather forecasters on TV aren't going to take your call when the sky turns soupy or the clouds collide. But as every advisor knows, a crucial part of the job is to guide clients during frightening times, to show them the way when they may feel lost at sea. To be the lighthouse.
That doesn't mean offering false hope or downplaying serious situations. It means sharing the wisdom gained from experience by shining a light in the darkness.
"I'm telling people that it's a good time to buy, and in fact, I'm doing that with my own funds-buying great, good-quality, large-cap U.S. and international companies, oriented toward those that pay dividends," Rhonda Arnett, a senior financial advisor with PrimeVest in Tacoma, Wash., told a Financial Planning writer during the August swoon.
Denis Fatovic, an advisor with Financial Network Investment Corp., in Teaneck, N.J., told us, "The phones were ringing off the hook. People wanted explanations and answers. Some were in a panic and felt they had to sell something out of their portfolios. I told people that they needed to separate emotion from real practical investment issues and that I could help with those issues, but not with the emotions." Alejandro Murguia, a principal at McLean Asset Management Corp., in McLean, Va., also was a lighthouse: "If you become an event-driven investor, you're going to be lacking the foundation that helps guide you toward your objectives," he told an FP writer.
Kevin McDermott, a senior financial advisor at Citadel Federal Credit Union in Downingtown, Pa., wanted his clients to know they'd be safe, telling them to "sit tight." At the same time, he did not advocate venturing any further out to sea. "I've had some clients buy assets, but I'm not actively going out and saying, 'This is a buying opportunity,e_SSRq" he told FP.
A man who's a lighthouse to the masses, Warren Buffett, quipped, "I like buying on sale." He told Charlie Rose that, "Last Monday," referring to the first trading day after S&P downgraded U.S. government debt, "we spent more money in the stock market buying than any day this year."
The advice differed, naturally, because clients have different objectives, but Arnett, Fatovic, Murguia, McDermott and Buffett each helped investors battered by the extraordinary waves to see clearly that they need a strategy they're comfortable with-whether it's riding out crises, buying on the dips or rebalancing their portfolios so market storms don't leave them panicked. Because another storm is coming, and your clients will need you to be their lighthouse.