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Financial Planners Play Therapist to Paralyzed Liberals

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Investors across the country are variously cheering and mourning the election of Donald Trump as U.S. president. In some cases, they’re pressing their financial planners into double duty as therapists. Or grief counselors.

In San Francisco, where Trump won 9% of the vote, people seem depressed, said Milo Benningfield, a financial adviser based in the Presidio, next to the Golden Gate Bridge.

“The most common remark I’ve heard is, ‘I feel like somebody died,’ ” he said.

“It does seem like a mourning process,” said Jennifer Hatch, managing partner of Christopher Street Financial, 3,000 miles away in New York. Though the financial planning firm has specialized in the lesbian, gay, bisexual and transgender community since 1981, even Hatch wasn’t prepared for the emotional challenge of watching her clients struggle with the Election Day shocker.

“Some people are sort of frozen. Some people are just depressed,” she said. “And some people have gone on with their lives—although you really can’t escape the conversation.”

Overconfidence can hurt investors, but if you’re saving for retirement or other long-term goals, too much fear and caution can be even more dangerous. To get returns, you need to take risks. If you’re paralyzed, or panicking, you’re likely to shut down when you should be looking for opportunities, or to sell at exactly the wrong time.

Never make a major decision after a funeral, the financial advice goes. Grief can warp your judgment in ways you might later regret. And while millions of Americans are ecstatic at Trump’s election, another slice of the country might as well be wearing black.

Differing emotional reactions to the election show up in Gallup polling data. Before Trump won, 16% of Republicans said the economy was getting better, vs. 61% of Democrats. Post-election, Democratic optimism about the economy plunged 15 points, while the share of Republicans saying the economy was improving tripled, to 49%.

So it is that financial advisors find themselves playing political therapists for their progressive clients, coaxing them to stick to investment plans even if they feel the world is ending. Their job is made easier by the stock market. Despite widespread predictions that a Trump victory would send equities into a swoon, the broad S&P 500 index is trading at all-time highs. It’s up 2.7% since Nov. 8, while bond prices have fallen by about the same amount.

Benningfield points to this as further evidence that predicting the stock indexes is a fool’s game. “The worst thing an individual investor can do right now is to try to outguess the market,” he tells his clients.

That includes trying to predict which industries will benefit from Trump’s presidency. Eight years ago, analysts worried that Barack Obama’s presidency would be bad for pharmaceutical stocks. The S&P’s pharma stocks have more than doubled since Obama was elected.

Some advisors are urging incensed clients to fight Trump with their portfolios. U.S. assets committed to “socially responsible” strategies have tripled since 2007, to $8.7 trillion, according to a report this month from US SIF: The Forum for Sustainable and Responsible Investment. These investments come in a bewildering number of flavors, taking into account everything from environmental impacts (climate change, for example) to social criteria (treatment of LGBT employees) to governance (women in company leadership, shareholder rights) to blends of all three.

There’s evidence that screening for these criteria can help identify better-performing stocks, though investors need to look out for high fees charged by some SRI options. Benningfield recommends the sustainability funds offered by Dimensional Fund Advisors.

Investors might also look for mutual funds that pursue shareholder activism by lobbying the companies they own to pursue more progressive policies, said Robert Zevin, founder of Zevin Asset Management, a Boston-based firm specializing in socially responsible investing. Or individual shareholders can lobby companies themselves.

Even if pundits are temporarily right about who wins and loses under Trump, “a sophisticated investor—someone who is investing for the long term—doesn’t want to be overly concentrated in particular sectors,” Hatch said, but diversified and “able to weather all storms.”

Advisers point to the stock market crash of 1987, the terrorist attacks of September 2001, the 2008-2009 financial crisis, and many nasty recessions as proof that the market rewards investors with nerves of steel. If this doesn’t make them feel better, there is still something they might safely do: Sell stocks. Some stocks.

“There’s nothing wrong with making your portfolio a little more conservative, if that makes you sleep at night,” said Diahann Lassus, president of wealth management firm Lassus Wherley, based in New Providence, New Jersey, which has clients on both sides of the political aisle. With the S&P in the stratosphere, many portfolios are probably due to be rebalanced from stocks into bonds, anyway.

Or pour your energy into action. One of Hatch’s clients ended up selling some investments to write a check to Planned Parenthood and the American Civil Liberties Union. “That’s what helped him feel better,” Hatch said.

It may also save clients some money, thanks to the president-elect. On the campaign trail, Trump promised large tax cuts aimed mostly at wealthier Americans. If enacted next year, these changes could make deductions for charitable contributions less valuable in future years than they are today. That gives well-heeled progressives additional incentive to pull out their checkbooks over the next month.

Or escape the whole thing for a week.

“It’s an especially good time to plan a vacation,” Benningfield said, encouragingly.

— Check out Meir Statman: What ‘Normal People’ Really Want From Advisors on ThinkAdvisor.


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