Financial Hand-holding


Planners reassure clients that recovery from the slump will come eventually

December 28, 2008|By EILEEN AMBROSE

If your mailbox is filling up faster than usual, thank your financial planner.

Ever since the failure of Lehman Brothers Holdings in September that set off a panic, planners have been sending three to five times the usual number of newsletters and e-mail blasts to clients.

"We have been sending out a lot of articles trying to reassure people that they need to hang in there as long as they can," says Annette Simon, a Bethesda financial planner. "The instinct for a lot of people ... was to get out and maybe stop contributing to their 401(k). It was so scary, and it felt so sudden to a lot of people."

Planners say they are trying to reach out to clients before panic can set in. They also try to put what's happening today in historical perspective, often assuring clients that we're not headed for another Great Depression.

"Not only are the Feds showing amazing imagination in resolving the credit crisis, they are showing the lengths they will go to eliminate the possibility of a second Great Depression," says a newsletter from Money Plans in Silver Spring.

Many planners also shoot off e-mails in response to news events that could further shake investors' confidence.

Florida financial planner Mari Adam says she didn't intend to write about the alleged $50 billion Ponzi scheme by Bernard Madoff until it appeared that many Floridians were victims or knew victims. Days after Madoff's arrest, Adam sent a letter advising clients how to avoid a similar fate.

The missives try to be encouraging, sometimes reminding investors that bull markets follow bears. Others gently chide clients to spend less, reduce debt and hang onto their jobs.

New Hampshire planner Carl Johnson tried to bring some levity to dismal economic news by sending his 6-year-old's drawing of Wall Street and Main Street to clients.

Planners frequently share words of wisdom from others, such as investment guru Benjamin Graham, economist John Maynard Keynes and even Forrest Gump.

And if billionaire Warren Buffett got a nickel every time planners quoted him - "Be fearful when others are greedy. Be greedy when others are fearful" - he'd be, er, a lot richer.

Planners say clients are usually glad to hear from them. Many clients these days are mad, but not at their advisers, planners say.

"Mad at the government. Mad at the bankers. Some are mad at themselves. Some people are angry at the world generally," says John Bacci, a Linthicum planner.

And those who aren't angry are often resigned or glum. "I did have a client come see me after going to a wake. He told me that it 'got him in the mood' to look at his portfolio," Bacci says.

Many planners warn clients not to expect a quick turnaround in the stock market or the economy.

But Saxon Birdsong, a chief investment officer in Columbia, says he thinks the stock market hit bottom in November. He will include that in his upcoming year-end letter to clients. He says he'll also tell them "that we will have a choppy recovery. And if you are on the sidelines, you should be finding your way back in slowly over the next three months."

reassuring words

Annette F. Simon, Garnet Group, Bethesda (left):

"We can only position our portfolios to endure downturns and participate in rallies. ... But you can control your own financial destiny to a much greater extent by consistently living on less than you earn, saving regularly and, especially in these uncertain times, working hard to hang on to your job."

Mari Adam, Adam Financial Associates, Boca Raton, Fla. (left):

"When someone is claiming to have investment results that are far better than peers or the overall market, or performance that is amazingly consistent in an inconsistent world, don't be impressed. Be skeptical and stay far, far away."

J. Michael Martin, Financial Advantage Inc., Columbia:

"One thing we are quite confident of is that a successful portfolio in the new environment will be very different from one that worked during the credit boom years. This time it is not a case of 'just be patient and hold on; things will get better as they always do.' No! things will be different; very different."

Jim Pasztor, Pasztor & Associates, Aurora, Colo.:

"One of my frustrations this year, as it was for many advisors, was how little diversification worked. Normally when one part of the market goes down, another does not go down as much, or goes up. We essentially had all markets going down this year. ... Going forward, this has reinforced my thinking on the importance of the entire financial picture, not just investments."

reassuring words

Carl Johnson, Ames Planning Associates Inc., Peterborough, NH.:

"We also know that protracted periods of decline are not historically followed by similar periods of decline: quite the contrary. Protracted periods of decline are most regularly followed by a prolonged period of above-trend returns, and the most significant part of any major bull market always comes in its first several months.

Theodore Feight, Creative Financial Design, Lansing, Mich.:

"The American people have lived a lifestyle reserved in the past for royalty. Think about the homes we live in, the cars we drive, the furnishings we have and the food we eat. If you were to transport a person from 100 years ago to today, he would not believe his eyes. However, that all has come at a cost. No, we have not paid the cost, but we and/or our children are about to."

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