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Robin Powell






An experienced television journalist, Robin runs Regis Media, a UK-based content marketing consultancy which helps financial advice firms around the world to attract, retain and educate clients.

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Don't neglect yourself

After the market crash of 2008 Dr Bradley Klontz and Dr Sonya Britt from Kansas State University conducted a study amongst financial planners. They wanted to find out what the psychological impact of the great financial crisis had been.

“Certainly, an unexpected significant market downturn can be a traumatic experience for a financial planner,” the researchers wrote. “The experience need not include an actual physical threat to the financial planner (although more than one client did threaten a planner with physical violence during the downturn), but the financial planner may feel shock and intense emotional distress.

“In essence, the financial planner feels responsible for their clients' financial welfare, is helpless to change economic events, and in many cases is terrified that his or her own financial health and that of his or her employees may be jeopardised as a result of dramatic drops in assets under management,” they added.

When the study was published in 2012, Klontz and Britt noted that 93% of the financial planners they had interviewed reported symptoms of anxiety, depression and even post-traumatic stress disorder.

“Financial planners who felt a sense of disbelief, were anxious, had trouble sleeping, were emotionally distraught, and were calling into question their basic assumptions about how to help clients reach their financial goals during the 2008 financial crisis were not alone,” wrote the authors of the study. “The majority of financial planners surveyed reported significant symptoms of post-crisis stress.”

Helping clients

It is not hard to imagine that many advisers would have have felt similar levels of anxiety in the first few months of this year. They would have been dealing with many distressed clients in the midst of the market crash.

The alarm that investors were feeling was also likely to have been heightened by fears for their health and the safety of their loved ones. Clients weren't just dealing with a financial event. They were having to process this in the midst of a global pandemic.

It can be traumatising for advisers to deal with scared, upset clients day after day. This is not just because they feel responsibility for managing their clients' emotions and calming them down. Often, advisers also internalise what their clients are feeling. They take on those same stresses themselves.

Speaking at the recent CFA Institute annual virtual conference, Dr Daniel Crosby, author of The Behavioural Investor, said:

“For wealth managers and financial advisers, we are often the last line of defence between our clients and a very poor decision. That can be stressful. We become a sponge for the fear, stress and angst of our clients.”

Altered state

It is important that advisers recognise this, because a positive mental state is so important for doing their job. In a recent article, Meghaan Lurtz, a senior research associate at noted that:

“Unless the stress is somehow dealt with, a range of adverse symptoms can result – from physical changes to emotional, behavioural and relationship changes.”

This is, in fact, what Klontz and Britt were primarily concerned with in their study after the 2008 crisis. The symptoms of stress that they discovered “were accompanied by self-blame, negative thoughts about self, negative thoughts about financial institutions, uncertainty about how to help clients, and the belief that the economic situation represented a fundamental change in the rules that have governed the financial planning industry”.

One of the consequences, they discovered, is that many financial planners may have moved away from 'buy-and-hold' strategies as a result of their post-traumatic stress. They were instead engaging in tactical asset allocation and trying to time the market.

This may be because, as Crosby pointed out, “large parts of the job are so far out of our control”. Advisers could do nothing to prevent the market from crashing. They therefore responded by trying to find something that they could control.

Helping ourselves

The success of market timing and tactical allocation strategies is, however, highly irregular. It is extremely difficult to do this consistently well. It is also, arguably, not where advisers are able to add the most value for their clients.

Rather, advisers are better off managing their clients' expectations, helping them to stick to their long term plans, and keeping them from making snap decisions.

In order do that, however, advisers need to be mentally strong themselves. They need to be able to think clearly, and rationally, whatever is happening around them.

They can't do this if they are as stressed as their clients. Which is why it should be a priority for every adviser to look after their own mental health.

Recognising stress and being willing to address it should not be seen as weakness. It should be understood as a vital part of being able to do their work effectively.

Picture: engin akyurt via Unsplash

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