Recently, advisors in my coaching program have been asking, “How can we deal with the fear and anxiety that our clients are experiencing because of the current market conditions?” It’s a darn good question.
There are no easy answers. Training clients to expect down markets and putting their money in broadly diversified portfolios are great strategies. Unfortunately, they may not be enough. Furthermore, you would have had to employ these strategies long before today for them to be working for you now.
But let’s take a different approach. Instead of looking at the markets, let’s look inside the heads of your clients. Their fear and anxiety is based on their values and beliefs, not just the current market.
American Myths About Money
A while ago an article about a “very successful investment banker” caught my eye. Upon reading the story, I was dismayed to learn that he had been divorced three times, his son was in jail, and his daughter was in rehab. That’s “successful”? Clearly the writer was using a one-dimensional standard–money–to measure success.
Our country was founded in part on the “pursuit of happiness,” but it seems that most Americans believe that money can buy that happiness–or at least that a little more money will make them happier. When a journalist asked Henry Ford how much money the average American needed to be happy, the auto magnate put his thumb and forefinger about one inch apart and said, “About this much more.” In a survey conducted by the University of Michigan in which people were asked what would improve the quality of their life, the majority said, “More money.” And in 1995, 75% of Americans entering college declared that an “essential” or “very important” life goal was “being very well-off financially.” This topped a list of 19 life objectives, exceeding even those of “raising a family” and “helping others in difficulty.”
More, More, More
In 1957, Americans’ per capita income, expressed in today’s dollars, was about $9,000 per year. Today, it has more than doubled. We now have twice as many cars per person, we eat out more often, we have air conditioners, dishwashers, stereo systems, and all sorts of material wealth. But are Americans happier now than we were 45 years ago?
From 1957 to 1996, the proportion of Americans polled at the University of Chicago’s National Opinion Research Center that said they were “very happy” declined slightly from 35% to 30%. Meanwhile, divorces doubled, teen suicide has tripled, arrests for juvenile crimes has increased sixfold, and depression rates are soaring, making Zoloft and Prozac some of the best-selling products in our economy today. What’s wrong with this picture?
In 1968 I went to Turkey on a high school exchange program; recently I traveled to Ecuador, which is considered to be one of the poorest countries in the Western hemisphere. In both cases, the farther I got away from the major cities, the poorer the people were. They had nothing compared to the wealthy folks in the cities. Yet they exhibited a joyfulness that still moves me today. Happiness, it seems, is less a matter of getting what you want than of being satisfied with what you have.
Indeed, a University of Michigan study showed a virtually negligible relationship between happiness and wealth. Even very rich people, those surveyed among Forbes’s 100 wealthiest Americans, are only slightly happier than the average American. And people whose incomes increased over a 10-year period were not happier than those whose incomes had not increased. The survey concluded that “economic growth in affluent countries provides no apparent boost to human morale or happiness.”
Wealth, it turns out, is like health: Although its utter absence can bring misery, possessing it is no guarantee of happiness.
So what if, instead of thinking of yourself as a financial advisor, you thought of yourself as a coach whose role was to help people make appropriate choices with their money and their lives so that they could enjoy more happiness in their lives? I believe that one of the most important issues for financial advisors, particularly in today’s markets, is to help people discover alternatives to material wealth that will help them lead more rewarding lives.
A Psychological Perspective
Dr. Martin E. P. Seligman is the past president of the American Psychological Association (APA) and a founder of a new discipline of psychology called Positive Psychology. His co-conspirator is Mihaly Csikszentmihalyi, the author of two books on happiness. Positive Psychology focuses on the study of positive emotional states and how to achieve them. There are now major research projects going on all over America to scientifically determine what happiness is and how to achieve it. We know what stress can do to people’s health, but we are just starting to discover the benefits of laughter, positive emotional states, the healing power of positive expectations for the future, and goal-focused living.
Let’s look at how you can apply recent psychological research to help clients respond to current market performance.
Limit Clients’ Exposure to “Investment Porn”
Most of the mass media is about bad news. There’s very little good news, because good news doesn’t sell. What sells is drama, conflict, and confrontation. That means the financial media is having a field day pushing people’s hot buttons with constant bad news about the markets.
Since there is nothing your clients can do to change the markets, however, why should they force themselves to get a daily dose on agony from the media? Remind them that much of the financial media is really “investment pornography.” They’re not in business to help people to achieve their long-term goals; they’re in it to make money for their shareholders, and will inflame and exaggerate every bit of bad news to get people to tune in. Encourage your clients to read publications that give a thoughtful, balanced perspective on the markets.
Replace Negativity With a Positive Vision
Many people spend enormous amounts of time worrying about the future, projecting their worst fears onto the coming years and creating anxiety and stress for themselves. You can make them happier by helping them alter how they think about the uncertain future.
Many clients do not understand our free-market system and how securities markets behave, so they are easy prey for the media to scare the living daylights out of. When you explain to them the historical perspectives on the market and how markets truly work, you can help them project a more optimistic scene onto the unknown future.
The best way to do this is to help them envision themselves looking back at this period and seeing that it was just a blip on the radar of a market that always–eventually–goes up. By helping them create a positive vision of the future based upon the realities of how free markets work, you can replace their fear and dread of the future with happiness and positive visions of the future.
Three Hints for Happiness
Beyond the questions of how to react to market performance, it’s important to help clients look at the other factors that contribute to–or detract from–their happiness. There are three things that researchers have discovered were common denominators of happy people, and, fortunately, they are things over which your clients do have control. With your encouragement, your clients can modify their behavior to increase their happiness.
#1: Surround Yourself With the Right People
Happy people surround themselves with people who care about them and whom they care about. Encourage your clients to spend time every day with people who make them happy. Get them to focus on the positive feelings these people bring, and discourage them from hanging out with people who whine, complain, or otherwise create bad feelings for them.
Ed Diener, a psychologist who studies happiness, says, “Our findings suggest that very happy people have rich and satisfying social relationships and spend little time alone relative to average people.” People are major mood-influencers, so remind clients to choose relationships that empower them to be happy.
#2: Enjoy Your Work
The second thing that researchers found made people happy was doing work they felt was meaningful and was a good match for their skills.
Most people think that if they “tough it out,” when they eventually retire, they’ll be happy. But if they enjoyed their work, if it provided meaning and a sense of accomplishment, they wouldn’t want to retire. In fact, many people retire, and when they go back to work just to keep busy, they finally find the right work that truly satisfies them.
Encourage your retired clients to find some way to contribute that gives their life meaning and purpose. It should be challenging enough to keep them growing and learning. In today’s market, some people who retired may have to go back to work, but this could be a good thing, if they see it as a way to feel useful while they are supplementing their income. And if your clients are still working, help them design their jobs so that they get more happiness from them.
#3: Enjoy Your Environment
The third common denominator of happy people is that they enjoy their environment. This means everything around them on a daily basis: their home, neighborhood, commute, office, and city. Many people live in a place they don’t like for a job they don’t like, working with people they don’t like. Encourage them to change their environment; it could have a dramatic impact on their happiness. If your clients like their environment and the people they associate with, and they have meaningful work, who cares what’s going on in the market? They are going to be happy every day, because they have taken control over the important things in their lives.
This is one of the most difficult markets the world has ever seen. We need bold new strategies to serve clients in a market that is making them dazed, confused, anxious, and fearful. By taking a lead from our colleagues in the psychology field, we can help them in a meaningful way regardless of the market conditions.