Lemmings, the Fiscal Cliff, and other Half-Truths

Contrary to popular belief, lemmings don’t hurl themselves off cliffs. And the Fiscal Cliff is more like a hill. However, this hasn’t prevented the collective media from banging their persistent Drumbeat of Fear.

For financial advisors who’ve been around for a few years, it might seem like déjà vu all over again. (Thank you Yogi!) Indeed, since 1985 – when the Dow Jones Industrial Average stood at around 1500 -- there have been 15 distinct spikes in U.S. economic policy uncertainty.

[Check out the Index of Economic Policy Uncertainty. Very interesting!]

And as of today, the U.S. economic system is still standing, or at least it is until this Friday (the Mayan apocalypse, you know).

Sarcasm aside, it is interesting to see how investor perception can differ from reality. In another good example of this, Edward Jones released a study last week that indicated that 44 percent of those surveyed believed that the performance of the stock market was flat or down year-to-date…when in reality, it’s up (The S&P was up 12 percent year-to-date at the time of the survey).

The Role of the Financial Advisor

Of course, financial advisors play a critical role in all of this. For many investors, their worst enemy is inertia. And a primary contributor to investor inertia is fear.

In this fearful milieu, financial advisors can serve their clients well by doing three simple things:

1. Creating a trusting environment that allows the client to articulate their fears and concerns.
2. Actively listening to what the client is saying (or not saying).
3. Prompting even deeper discussion with thoughtful, empathetic questions.

At ClientWise, an executive coaching firm that specializes in the financial advisor community exclusively, we believe that the financial advisor is THE most important advisor. The advice and guidance that a financial advisor provides influences not just the client directly, but many generations indirectly.

Spikes in U.S. economic policy uncertainty are not likely to end anytime soon. What can be moderated is how investors respond to them.

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