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May 15, 2013 at 04:12 AM
Back in the 1990s, the editors of Worth magazine (including myself) invited celebrated financial journalist Joe Nocera (then an editor at Fortune magazine, where he eventually rose to editorial director, and now a columnist at The New York Times, and author of “All the Devils Are Here” about the 2007 mortgage meltdown) to talk to us about the investing habits of our Baby Boom generation.
His message was radical at the time (and probably still is): Contrary to the prevailing notion that the “Me” Generation was simply a bunch of irresponsible spendthrifts, Nocera argued that the Baby Boomers’ approach to finance was a perfectly rational response to the financial markets we grew up with. In the same way that our parents (who were young during the bank failures of the Great Depression in the 1930s) had a fundamental distrust of financial institutions, we Boomers’ formative years were defined by the double-digit inflation rates of the 1970s. Consequently, we learned to distrust “money,” and that “buying now” was smarter than waiting until prices were even higher.
I often think of Joe’s theory about us Boomers when I hear discussions about how the 2008-’09 meltdown (when the S&P Dow dropped from 10,831 to 6,547) has affected financial advisors—and wonder whether that experience will have an equally profound effect on them. Over the past year, two studies have come out that shed some light on how advisor attitudes have changed, yet I wonder whether the authors in either case have given enough weight to how much catastrophic financial events can shape investment attitudes.
First, Bob Veres surveyed 1,090 advisors toward the end of 2011 about changes in the way they manage client portfolios, post 2009. He found that some 83% were anticipating making “tactical adjustments” to their client portfolios. In contrast, back in 2005, an FPA study found that only 24% of the financial planners surveyed made “material changes” in their clients’ portfolios… …based on expectations regarding changes in the market.”
