YOUR MONEY; The Financial Adviser as Hand-Holder
Good financial advisers have the examination skills of an ace psychologist. But some of them actually were psychologists before they switched to helping people manage their money for a living. And as you might imagine, they've been awfully busy in recent days.
After all, uncertainty breeds anxiety. This week alone, we witnessed the market plunge on Monday, a tussle over the scope of the federal bailout that grew on Tuesday and the unfamiliar sight Wednesday night of watching our normally cocksure president pleading for support on national television.
By Thursday, Washington Mutual was dead and gone and on Friday, the politicians in Washington still hadn't settled their differences over the bailout. We can only hope that the package will allow the federal government to quickly clear bad debt from companies' books and grease the wheels of the economy. But who knows how long it might take or if it will even work?
All of these uncertainties weigh heavily on our minds. So this week, I turned to financial planners and investment advisers who got their start as psychologists or studied the field as graduate students, plus a few ringers who are adept observers of minds and money, even though they have formal training only in the latter.
I asked them this: At this troubling moment, what's the best way to reorient how we think about money, before we make any rash decisions about what to do with whatever we have left?
Start, just for a minute, by giving yourself over to the worse case. The visceral fear here is of dying in the poorhouse, as Richard Schroeder, a certified financial planner with Schroeder, Braxton & Vogt in Amherst, N.Y., put it. And his answer to clients who articulate that nightmare is this: the markets will eventually recover.
So let's reel ourselves back from the edge of oblivion. Most of us can take some comfort in the fact that we have time on our sides. Managing our money is a process that unfolds over decades, not days. It's easy to forget that, when one company after another is falling victim, week after week, and we can track their disintegration on an hourly basis.
''The individual needs to go back to that personal road map,'' said Sharon Rich, a financial planner with a doctorate from Harvard who studied women, psychology and education. ''Where are you right now, where do you want to be and how do you get from here to there?''
And then apply that to an investment portfolio. ''I think reminding people in this environment of why we've chosen the investment strategy that we have is a good thing for those who are a little bit antsy,'' said Constance Barber, a certified financial planner with Barber Financial in Natick, Mass., who got her start as a school psychologist. ''We've usually not set this up because it's money that you'll need tomorrow.''
Even if we don't need the money right now, it doesn't feel good to look at a retirement portfolio and find that it's down 15 percent from its peak a year ago.
''People rely on selective memory when they're only looking at losses from the high point that the portfolio reached,'' said Victoria Collins, who has a Ph.D. in social psychology from the University of California, Berkeley and has worked as a certified financial planner for more than two decades.
This was a point echoed by many people I spoke with this week. On one hand, it's certainly depressing to be down to $340,000 from $400,000, for instance. The basic math doesn't help the mood either, given that after a decline of 15 percent, a portfolio needs to gain 17.6 percent just to get back to $400,000 again. ''This is real money in people's lives,'' said Ms. Rich, who runs Womoney, a financial planning firm in Belmont, Mass. She noted that some people added up how many years it took them to save the money that just disappeared.
We can mimic that mindset if we choose, or we can consider what our balance was, say, a decade ago. Chances are we've made a lot of progress since then, if we've been saving all along. ''There are clients who will say, 'Yes, it's down, but look where I started,' '' said Ms. Barber, the former school psychologist. '' 'I'm hanging in there, and we've come a long way, baby, and it's O.K. for now.' ''
Next, put down the retirement account statement and consider the credit and debit card bills and the checkbook. Ms. Rich put some clients with job security anxieties through this exercise this week. It isn't a budgeting drill exactly. ''The question is how the way I'm spending reflects my values and what I think is important in the world,'' she said.
For those of us who pay someone to clean our house, she said, perhaps having a clean house isn't really that important when we reconsider. Or if we think it's crucial for our children to experience nature, perhaps a series of day trips can have the same effect as going to the Grand Canyon.
School costs are an issue here too, Ms. Rich said, and she noted that such reconsideration may mean spending more, not less, on certain items.
One tricky part about the last several weeks is confronting all the headlines declaring this the worst financial crisis since the 1930s. ''Most of the individuals that I find who need more handholding are the ones who've had some connection with the Great Depression,'' says Ms. Collins, the Berkeley Ph.D., who is now an executive vice president and principal with Keller Group Investment Management in Irvine, Calif.
These people tend to be retirees, who may have had parents who told them stories about living through the 1930s or are old enough to remember it themselves. If they have little or no earning capacity now, they feel especially helpless when they see parts of their portfolios disappearing.
''I try to remind them that even they don't need all of that portfolio today,'' she said. ''You're only withdrawing a certain amount.''
Ms. Rich suggested that people reach out to someone else to discuss their situation if they don't have a hybrid financial adviser-shrink to counsel them through the crisis. It could be a peer, a family member, a member of the clergy or staff at a senior center.
Even that support network may not be enough to bring the most anxiety-prone among us back from the edge. ''For those who cling to doomsday scenarios we can also say, 'So what?' '' Mr. Schroeder, the financial planner in Amherst, N.Y., said in an e-mail message. ''If the markets go to zero, if the whole system crashes, there is no safe haven, so it doesn't matter whether you buy Treasuries. The currency will be worthless and there will be chaos in the streets. Your only alternative is to stock up on guns, ammunition and goods that are easily tradable and will become valuable, such as sewing needles, good Scotch, etc.''
Now, forget about hoarding sewing supplies and remember that things are much more likely to get better than they are to get that bad.
PHOTOS: Constance Barber is a certified financial planner in
Natick, Mass. (PHOTOGRAPH BY JODI HILTON FOR THE NEW YORK TIMES)(pg.
C1); Victoria Collins, who has a Ph.D. in social psychology, is an
executive vice president for Keller Group Investment
Management.(PHOTOGRAPH BY J. EMILIO FLORES FOR THE NEW YORK TIMES)(pg.