What Is Old Is New Again

Sep 29th 2011
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By Tony Batman, chairman and CEO, 1st Global

In September of 2008, our industry experienced the anxiety ridden crisis in what historians generally now refer to as “Lehman weekend,” which began one of the most difficult tests of our financial advisory careers. It was a capital market event of epic proportions that led to our current economic state. Credit seized up all over the world and shifted our global economy into a long and deep recession. Asset values in virtually all classes plummeted. But just three years later, we are victorious over that test and we are wiser for it.

Last month, Standard & Poor’s downgraded the U.S. credit rating. Also, we are well aware of the stubborn 9.1 percent unemployment, one in seven Americans on food stamps and the GDP ambling along at an anemic one percent. In fact, since July 25th of this year, despite some recent rallies, the market has declined 1,700 points or 13 percent off its top. These events would lead any normal tax-centric financial advisor to fear the test of 2008 is happening all over again.

But it is vitally important we remember what is old is new again and a student of history knows this current turmoil will cycle through. A student of history is never overly alarmed or excited at the current state of things or the appearance of trend. One would conclude such things will inevitably let one down.

In my opinion, there are three things causing the current anxiety. We have lost confidence in political leadership worldwide. We have lost confidence in the U.S. ability to responsibly manage its fiscal affairs. And finally, we collectively have fears of a double dip recession. On the bright side, I agree with Dr. Arthur B. Laffer, an economic advisor to 1st Global’s investment committee and consultant to its executive team. He believes we will experience a highly volatile period for the next year to 18 months, but as political policies designed to again drive prosperity are engaged and their adoption appears more eminent, the nation, its economy, and its capital markets will once again thrive.

Remember What You Know…

In the world of behavioral finance, the analysis of both anxiety and fear is an interesting academic endeavor.  It is worth being conscious of the causes of one’s mental state.

Humans desire certainty, including financial advisors who function daily in perpetual ambiguity. In the absence of certainty, people become anxious. Anxiety is much worse than fear. Anxiety expresses itself in a loss of direction, lack of action, inadequate action or overreaction. Anxiety comes from a feeling of a lack of control, not knowing the nature or the source of your negative mental state.

Human nature always tries to translate anxiety into fear because fear can then be directed towards a known cause, thus reliving our anxiety. To cope, we feel the need to dedicate our emotions to the source of our anxiety or fear. When we cannot identify the source of the anxiety, the anxious feelings take hold and cause more pain than the original source of anxiety warrants! Now we fear something that doesn’t exist and the vicious cycle continues.

Humans also transfer their feelings onto others. So, as advisors, we must stay focused on reality – what we know – to deal effectively with the anxiety of our clients.

Times of financial turmoil are cyclical and we must prepare ourselves by staying on the offense and on top of our game. Please take a moment to revisit a list I developed in 2008 to help you stay on track during these challenging times. Use these axioms to instill client confidence both in the markets and your ability to meet their needs.

1.       You must personally separate the realities of this market or any market from your advice – they are not linked.  Don’t link your advice to how the markets perform. This is not your role. Ensure your clients know that you are constantly working on being the best at your craft. Convey you care about them and your advice, in the long run, will be the right advice to follow.  Your clients have been through similar times with you before. This time is no different.

2.       Call the top 20 percent of clients – your most important clients – every week. Develop and practice a defensive and offensive client conversation and don’t deviate from that standard script.

3.       Use historical market information to help your clients understand what is going on with the financial climate. History is an excellent teacher and will give you faith in the future. If you do not believe this, you are reading an inaccurate account of our history. Your faith in the future can only be based on an understanding of history. You will be a rational optimist.

4.       Have your best local product wholesalers conduct group breakfasts with your clients. They can deliver the best messaging about their particular offerings and on market commentary. Perhaps better than you can.

5.       Attend educational events. It is essential that you stay abreast of key trends and product changes in the market place. Training and seminars are designed to facilitate your future success.  

6.       Call other advisors to get their perspective. Tap into this talented resource.  

7.       Begin a marketing campaign to get more top-tier clients. Wall Street and the insurance industries are both still wavering from recent economic conditions and this could be the best business opportunity of a lifetime. Go boldly on the offensive. Do not whine and have perpetual defensive mindset. Your top-tiered clients want to hear from you.

8.       Commit to fully understanding the unified portfolio theory and the whole framework of alternative investments designed to mitigate risk. With this knowledge, you will have more tools than ever before.

9.       Read Nick Murray, one of the industry's premier authors of eleven books for financial services professionals. Nick also publishes a monthly newsletter. This is essential reading to gain clarity.

For more information about offering wealth management services as a CPA firm and how strategic business partnerships with accomplished financial advisors can impact your growth plans, contact 1st Global at (800) 959-8461 or [email protected].

1st Global was founded by CPAs on the belief that accounting, tax and estate planning firms are uniquely qualified to provide comprehensive wealth management services to their clients. Each affiliated firm is provided with education, technology, business-building framework and client solutions that make these firms leaders in their professions through dedicated professional client relationships built around wealth management.
1st Global Capital Corp. is a member of FINRA and SIPC and is headquartered at 8150 N. Central Expressway, Suite 500 in Dallas, Texas,
75206, (214) 265-1201. Investment advisory services offered through 1st Global Advisors, Inc., an SEC-Registered Investment Adviser. Additional information about 1st Global is available via the Internet at

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