A vast amount of psychological research shows that graying adults–those from the mid-40s on–make decisions (including the decision to do nothing) on a different basis than younger individuals.
The latter rely mainly on analysis based on the facts as they see them and what they consider to be logical reasoning. Older adults rely mainly on their experience in life. The fundamental problem confronting graying insurance and investment clients today is that their experience does not appear relevant in the present crisis and, therefore, they have no basis on which to make financial decisions.
But in fact, graying clients do have life experience that is highly relevant to today's insurance and investments decisions. They need to be reminded of it. Here are suggestions on how advisors can talk to these clients so the clients can use their own experience to put things in perspective:
"I know things are uncertain now. Like everyone else I'm a little afraid, too, but when I begin to get upset I remind myself of history. First, in the depths of the Great Depression when unemployment reached 25%, Franklin D. Roosevelt said something that is remembered to this day: 'The only thing we have to fear is fear itself.'
"Things today are nowhere near as bad. America is stronger in every way; so is the economy. If we got through that, we'll get through this. If your father or grandfather had been able to invest in the broad stock market then, he would eventually have made a huge amount of money and you probably would be wealthier, too.
"Second, at the beginning of World War II in 1941, we had a very small army and after Pearl Harbor, a very beaten up Navy. Japan and Nazi Germany were far stronger than our present enemies and the United States and its allies were much weaker than we are today. Yet in just 4 years we won that war and put the world on the path to freedom and prosperity.
"If your father had been able to invest in the broad stock market then, you would probably be much wealthier today because both the U.S. economy and the stock market grew explosively during and after the war. For the record, the S&P 500 lost 11.6% in 1941 and then had 4 straight years of double-digit gains before losing 8.1% in 1946, the year after the war ended. It did not have another losing year until 1957.
"Third, after World War II, we had the Cold War. The Soviet Union was the greatest threat we ever faced because it had the nuclear capability to destroy this country. It was a vastly more dangerous opponent than present enemies. Remember, the Cold War went on for over 40 years, yet, despite the danger and huge sums of money the U.S. spent for defense, the economy grew and grew and so did the stock market–and we won that war, too.
