How do we protect ourselves from the coming civil war?" I've been asked to help answer a lot of questions in the 20 years I've been in the planning business, but this one, posed to my firm, was new. It came in early 2009 when most people were concerned about the depth of the recession and the prospects of a depression. As I reflected on how clients reacted to the panic of 2008, a few thoughts emerged.

Concern was the order of the day, but as unsettled as things were, civil war did seem extreme to us. Earlier in my career, I probably would have begun a discussion or worse, a lecture, about why such an event was not going to happen. Today, I am more likely to welcome, than dread, a discussion with clients about the economy and even politics.



All of your clients have an opinion about the economy. The panic may have abated, but concern and fear still exist among some of your clients even if they have not yet expressed it. For some, their views are so strong that they will feel compelled to change their financial plans in ways you would not endorse. If you can improve your ability to have an effective conversation about economic forecasts, your clients are less likely to make financial moves they will regret.

It is important to understand that although I have a greater sense of confidence in addressing clients' economic viewpoints, I haven't found a magic script that makes everyone feel good and act rationally. Individuals are just that, individual. Some of your clients are indeed doing just fine, but silence does not equal comfort.

If you are expecting to read this article and be able to keep clients from worrying, allow me to manage your expectations: That is not a realistic outcome. However, I do think there are some concepts that advisors can use to help clients feel more at ease about the bigger financial world out there.



They may not be right, either, but they often think they have it correct. Most clients don't worry about civil wars, but they do worry about inflation, a declining dollar or even more personally, their jobs.

While we all have our own opinions about the economy, politicians and the markets, and we may share those with clients, convincing them that our views are better than theirs is not a recommended tactic. Clients didn't create their concerns out of the blue. In an effort to be better informed, they gathered information and placed more credibility in some sources than others. Usually the sources they listen to are ones that think like they do. Behavioral economists might call this "confirmation bias."

For instance, if your client grew up thinking communism was the embodiment of evil in the world, the idea that the Chinese own and buy so much U.S. debt might be scary. It only takes a commentator or two painting a dour picture of the future to frighten your client.

To address this issue, clients need to at least recognize there is another side, and the more they discover this themselves, the better. The situation is what it is, so there is little use in spending time trying to convince clients otherwise, unless the numbers they throw at you are clearly way off.

Your first step should be to assure the client that it makes sense to have some concerns, and he or she may be right about what the situation may lead to. After all, you can't prove his or her scenario won't happen. Only time will tell. You simply want to understand.

The best way to shed light on the other side is to ask questions and see where it takes the conversation. Ask something like this: "With rates so low, they could earn more elsewhere. What do you think the Chinese get out of buying U.S. debt securities?"

Chances are excellent the response will be interesting. Often the answer will show you that the client does not really understand the situation and is simply regurgitating someone else's theories. They may realize that is the case too.

Another common result is that the client will not answer the question directly, but launch into a description of what will happen because of the current situation. This is all right, too, because that's a direction you want to go in anyway and ask more questions. For instance, "Given how much stuff the United States buys from China, how would crippling the U.S. economy benefit the Chinese?"

By doing this, you learn more about the client's perspective, but the client learns about themselves a bit too. Very often, they realize, or remember, that economies and markets are far too complex for an A+B=C linear progression.



Fortunately, so do you. Tell them this and explain that your role is to make sure the actions are prudent and not something that could wipe them out.

Control is one thing people crave when things seem out of control. You can provide a sense of empowerment, by revisiting the planning process. If the plan was decent, implemented and monitored well, they likely are not as bad off as they think.

Taking a fresh look will also make clearer how many areas the client can control or at least greatly influence. They can control how much they save and spend. They can control how long they plan to work. They can control the amount of their intended bequests. They can control whether they will be speculators or investors. They choose the goals and priorities for their family.

Most import, they can control where they get their information and what they will do with it. We find a direct correlation between television news viewing and negative outlooks. Radio listeners tend to be even worse. It doesn't matter if they are conservative or liberal. The more they watch, the worse they feel, and surprisingly, they know this is the effect. Their rationalization for putting themselves through this is an effort to be "informed."

We also find that many clients are not really all that interested in economic and political matters, but believe they have to be given the circumstances the media presents to them. Many of these people can go cold turkey and simply turn off the tube or watch something else.

If they are genuinely interested in being informed, we try to help them do so in ways that won't raise their blood pressure so much. We have been pleasantly surprised at just how receptive people are to trying something new.

The most effective thing is actually quite old-reading. The sources quoted have no graphics around their face or distracting rolling marquis running on the bottom of the page. No one shouts, cuts off or talks over the other sources.

When reading, we encourage people to stick to legitimate news publications. Try to sample a couple that are thought to lean left politically and a couple thought to lean right. Stay away from personal finance articles that do nothing more than discuss what they think will happen in the next six months or a year.

At all times, ask clients to look actively for the counter arguments. Good journalists will provide them in their pieces. In a sense, we want our clients to think like real journalists. They look for evidence, not anecdotes. Doing this highlights that every issue has multiple sides and reminds people they cannot buy unless someone else is selling.



Sometimes people can't see another side of an argument or understand that things may not progress as they foresee. In some cases, the action a client wants to take is pretty radical by most planners' standards, like converting most of his or her assets into gold and stocking the pantry with canned foods.

Even in these cases, there is hope. If clients think we are headed to bad times, even a civil war, explore that world with them. We have had many bad times in the past to which we can refer. They all ended and were followed by prosperous times, by the way.

A lot of people today distrust banks, brokerage houses and government. It would be far worse in a depression scenario, let alone a civil war. You could ask, "If we sold everything and bought metals, where would you put them? You can't keep them at the bank or with a financial services firm. Back in the day, the government seized all the gold it could and made gold ownership illegal. How would you use the metal, chip a little off a bar? How many transactions would have to occur before people suspected you had more? What would happen to the price of gold if things didn't go as badly as you think?"

Hopefully the client will see that if the doomsday scenarios play out, the portfolio structure is the least of his or her issues. If the end doesn't come, life may be good, but the doomsday portfolio could be a disaster. Having a respectful conversation helps many clients see the disconnect present when they address the fear of an uncertain future by taking positions as though the future outcome is certain.

As a planner, you can help clients through their fears and manage risk. No one, not even planners, knows what will happen. It is all right to admit that.

Clients will respect you and listen to your advice if you tell them it is unwise to bet their life goals on anyone's opinion about the economy, politics or the markets. We may yet go into a depression. I don't think so, but I can't prove it. What I do know is that a tired old cliché like "Stay diversified" still has merit. Opinions are like noses; everybody has one. We follow economic issues closely so that we can provide balance to the discussion. It should be acceptable to make adjustments to a portfolio based on your outlook, but moving large percentages of assets in and out based on the news of the day is fraught with risk most people do not need to bear.

If clients really examine their impulse to position themselves as if their view is an accurate forecast, most will realize things aren't so clear and stay diversified. If the last two years haven't shown them just how unpredictable economies and markets can be, you have a whole other issue on your hands.

Good luck. Between the economic challenges, market uncertainty and the political landscape, you'll need it. Campaign 2012 will be gearing up soon!


Dan Moisand, CFP, has been featured as a top independent financial advisor by Financial Planning, Journal of Financial Planning, Accounting Today, Worth and other national magazines. He practices in Melbourne, Fla. You can reach him at