This Time Really Is Different, Rick Kahler Warns

Indeed, smart financial advisors and their clients must be ready for whatever comes, he says. This includes a likely recession.

Everyone needs a healthy emergency fund, and investors should have a highly diversified portfolio with at least 40% of equities in international, Kahler recommends.

The CFP gets his message across in multiple ways. His podcast is called Financial Therapy, and his most recent book is “Coupleship Inc.: From Financial Conflict to Financial Intimacy.”

In the interview with Kahler, who founded his fee-only firm in 1981 and in 2020 became the first Certified Financial Therapist in the United States, he strongly suggests that clients keep a cache of cash at home in case the government limits, for an unknown period, the amount of money they may withdraw from ATMs.

Here are excerpts from our conversation:

THINKADVISOR: What’s your take on what’s going on in the stock market?

RICK KAHLER: When we have a market downturn like this, people think, “It’s different this time.” Well, the circumstances change, but it’s really never different.

But this is different! This is not normal. We have a president that has defied a Supreme Court order. Even his advisors that are for extending the powers of the executive branch said it would be very bad for him not to follow a court order. Well, he hasn’t.

What are the implications?

You have to have a court system that’s respected and followed. We’re seeing the foundation of the rule of law starting to crumble.

Does the market care about that? Oh yes. This is fundamental for the market. So what worries me is not the flow of the market; it’s that the foundation of free trade, finance and a free economy is being eroded.

What are your thoughts about the tariffs that President Donald Trump has imposed?

Certainly I’m in the camp that believes tariffs will do long-term harm. There aren’t a lot of examples where tariffs have fostered sustainable, healthy long-term growth.

But we have a great example of how not having tariffs has created a remarkable economy decade after decade.

Are we facing long-term headwinds for stocks?

It depends on the long term of tariffs. We have entered a time of instability that’s almost unprecedented, certainly in our lifetime. So trying to prognosticate where we’re going is incredibly difficult.

Are we already in a recession?

Hard to know. People are tightening up. I have clients that have cut back — business people that have canceled orders, wondering if they can even sell this [or that] product any more.

So the tariffs are causing a huge amount of disruption already, and all of that is recessionary.

It’s mind-boggling. It’s incredibly scary and disruptive.

Prior to the tariffs, several economists stated our chance of recession at 18% to 30%. Now most of them are saying 50%.

All the players are lining up to suggest that a recession is where we’re heading.

Are Trump’s economic goals achievable?

The stated end-plan is to make our economy better than ever before. Will that work? I hope so, but the historical evidence doesn’t support that.

I don’t know if [Trump’s goals of] bringing back manufacturing and strengthening national security are really obtainable.

There’s a lot of talk about how other countries are stealing from us, taking advantage of us. Usually that [talk is tied in with] the trade deficit.

A trade deficit isn’t a bad thing. But it’s being portrayed as very, very bad.

What action should financial advisors take right now?

Financial planners need to prepare for a decline in revenue. They need to have their own emergency reserves. I would think they already have those.

We’re telling clients the same: Delay big purchases, build their emergency fund. If they haven’t, right now is still probably a good time to sell stocks and raise cash for [such a] fund.

People need to call their representatives and senators.

What else can advisors do?

We’re telling clients to keep cash at home. You should have some cash in small bills. This is insurance. [Bear in mind that in the Cypriot financial crisis, 2012-2013] the Cyprus government limited the amount of cash people could withdraw from an ATM [to prevent increased destabilization].

What other actions should advisors take?

They should have conversations with their clients about strategy. We’re telling clients to right now stay the course, of course. Don’t time the market. If they’re not diversified, they should get diversified quickly.

If they’re heavy in U.S. stocks, put at least 40% of their equities into international.

We’re buying countries based on their capitalization to the world market.

You’re a financial therapist. Are you finding more people seeking financial therapy during these tough times?

I see more and more coming to me for financial therapy. But I don’t think that’s necessarily a result of what’s happening because it’s been so short-term.

We entered a bear market, and now we’re out of it.

But if we run into a bear market that will go lower, we’ll see more people reaching out for financial therapy.

I think it’s reasonable to assume that more people want to see a general therapist in view of what’s happening. Am I right?

Yes, because of anxiety, fear and helplessness. Therapists are overbooked. Getting in to see one these days is like winning the lottery.