In one of his recent weekly articles, Paul Dietrich, chief investment strategist for B. Riley Wealth Management, made a statement to the effect that fear is not an investment strategy.
While fear is not a strategy, we know that fear often creates a kind of panic that causes seemingly rational people — some of them our clients — to question, modify, or even abandon their current strategy (and maybe us along with their current strategy).
Apparently, those clients do not fully understand their strategy, cannot articulate how their chosen financial vehicles operate within their strategy, and have no idea if, or how, any current or future crisis may derail their strategy. They may not phrase it that way, however. Instead, they say things like:
“I can’t do 2008 again!”
“I thought I was in low-risk stuff!”
“I just don’t want to lose any more. I can’t afford to!”
We need to do our job better.
Our clients need to know that, whether or not the next pandemic hits close to home, or chaos comes to their street, or the “wrong” candidate is elected, or the market implodes, their strategy has made them “bullet-proof.”
We can do that.
We need to understand that, at some point in our clients’ lives, they start to think like the famous American humorist, Will Rogers. He often reminded his audiences that he was at the stage of life where he was not nearly as concerned about the return on his investments as he was about the return of his investments. That was a typically shrewd Will Rogers observation. He understood he was thinking differently as he got older, and the truth is, so are our clients.
We need to ask our clients the right questions and then listen carefully to make sure we get the correct answers. Eventually, we will need to shift our focus away from the accumulation of assets towards the preservation and distribution of assets. That means we may need to shift to financial products for which we have had little use, and with which we are unfamiliar. That means we need to spend the time and effort required to become an expert in that arena, or we need to develop a strategic alliance with someone who is already an expert in that arena.
We need to know how to guarantee our clients’ monthly income needs for the rest of their life. That is our job. If we cannot do that, our clients will find someone who can. If we do not use the financial tools that will guarantee our clients sufficient income for life, they will find someone who will. If we do not entirely understand how to use fixed annuities, indexed annuities, fixed life insurance, indexed life insurance, and lifetime income benefits, our clients will find someone who does.
No one would hire a carpenter with a half-empty tool belt and the wrong tools (or no tools) to finish the job. It is amazing how many financial “professionals” show up to work that way every day. The tools we use to get our clients to retirement are not the same tools we use to get our clients through retirement. We need a full toolbox and genuine skill so we can build a “bulletproof” financial strategy.
With apologies to President Franklin D Roosevelt, we may have more things to fear than fear itself, but unnecessary losses of our clients (or their money) do not have to be one of them.