Crash Course

The shorter days of a waning summer usually herald a season of seriousness, as students of all ages crack open the books and hunker down for the stresses and strains of academic life.

The stock market too is not uncommonly stress-tested at this change of season, which has seen more than its proportionate share of crashes.

From the financial crisis of 1791 to the sub-prime mortgage crisis that began erupting in 2007, both children of September, to the numerous crises of Octobers past—such as the Panic of 1907, the 1929 crash preceding the Great Depression and 1987′s Black Monday—a lot more than leaves fall in the Fall.

I am not making any predictions of a market crash. Though I believe the economy and the market are both quite shaky, I lack the ability to foretell the timing.

But I think it wise to stress the role of the financial advisor before such an eventuality rather than after the fact.

It is to be hoped that you have an optimal or at least appropriate investment strategy for each of your clients. Many advisors don’t, preferring instead to follow fads.

I can recall the many advisors whose careers ignominiously ended after the Internet stock boom, when clients sued them for what appeared clearly to be ridiculous return-chasing practices that perhaps seemed “smart” when Books-a-Million’s share price soared 1,000% in a week.

The ride all the way back down clarified the appropriateness of buying a stock merely because it had updated its website—considered a big deal in 1998—or more likely because everyone else was buying it.