The noise is everywhere.
It’s politics and the markets. It’s 24-hour news channels and social media.
The noise is everywhere and it’s exponential, it’s on steroids and it drives our behavior and decision making whether we like it or not.
This past year as we have battled a global pandemic, clients called us and tried to allow the noise to dictate their behavior. It drove the amount of risk they could handle, their savings rate, and ultimately their financial decisions.
For a large percentage of Americans, the noise is still driving their decisions. It’s akin to a noisy GPS that is still trying to direct you, even after you have turned into your neighborhood. Intuitively, you know which direction to head, the best streets to take to avoid lights, and why driving through the town square and past the train station at traffic hour is a nightmare. Yet it is still difficult to ignore that blaring voice in your dashboard.
The best thing an advisor can do is help to quiet that noise. The best role we play is to lean forward, turn off the GPS, and assure you that together, we’ve got this.
Our job is to create a process to defray the noise and angst that clients feel when the volume rises, so that they don’t instinctively feel the need to pivot every time news breaks or the Dow is flashing red on their smartphone.
Now, I’m not going to pretend that it’s as easy as turning down the volume knob. Recently, clients I’ve worked with for nearly 20 years reach out to me. This last year, they sold her business to take on other projects but found themselves in a quandary. They are now considering re-entering the workforce because they hadn’t saved enough.
The thing is, I knew they hadn’t saved enough. Through the first seven years of our relationship, I advised them to focus more on savings, yet over the past 20 years they had built a lifestyle that their savings couldn’t support.
You see, it is part of an advisor’s fiduciary duty to urge clients to save. It is our duty to talk about cash flow, not the market, because over a period of 20 years, the market is irrelevant. If they had saved more each month for 20 years, they would be fine today.
There is a massive disconnect between noise and outcomes. The truth is, we waste a lot of time as financial advisors. We waste time watching the wrong scoreboard. Investments, the Dow, the S&P are all on the wrong scoreboard. As advisors, we need to create a better indicator and keep our clients focused on it.
Day to day movement in the stock market is not to be the driving factor to reach their goals. The best scoreboard is your savings rate. More savings and less spending will allow clients to stretch their nest egg for a longer period.
So why do most advisors allow their meetings to be absorbed by the noise? Because it is easier to ignore the devil in the room (client behavior) than to address it. No one wants to rock the apple cart or upset clients. We avoid difficult conversations laden with land mines about cash flow and lifestyle changes.
So, what is the solution? Develop a process now to avoid difficult conversations in the future.
From our first conversation with clients, we need to help them to identify their values, goals and objectives and regularly ask, “are you living in alignment with your goals?” Have them write out their wishes, values, goals and have those drive the decisions verses the stock market driving the decisions.
Focus on behavior, resources and on what matters most to them and to their families. We talk with our clients about their specific values and their goals and advise them to commit so their behavior aligns with those goals. Spend the time in meetings talking about that rather than what the market did that week.
If we dive deep enough as an advisor, we know our clients’ values and how they make decisions. We will understand the language to use to help them correct their behavior and know when they are not acting in alignment.
Yes, there will still be uncomfortable conversations, and our process will be tested as the noise increases, but together we can influence better outcomes.
Together we can quiet the noise.