Taking Your Own Advice Is Tough

If you haven't met me in the flesh, this is me. I'm smiling because around the time this photo was taken, my business had started to hit its' stride.

In the early days after resigning from my previous employing brokerage firm I had zero ability to execute on my own personal financial plan. My former sales manager had done an excellent job scaring away most of my clients, I had little to no revenue, and I was watching my savings deplete rapidly. There was no way I was in a position to save money or pay off my mortgage at an accelerated rate.

Through hard work, persistence, several great referrals, and some encouragement from like minded colleagues my practice expanded by 5x my second year. Throughout that year I focused on building up my cash savings, chipping away at some debt, and making sure my insurances were a reflection of my place in life.

Do Professionals Practice What They Preach? Telling someone what to do is way easier than actually doing it ourselves. Think of the overweight, wheezing doctor that waddles into your exam room. Or what about the auto mechanic who owns 5 cars, 4 of which don't run? When I do business with someone in my community, I would hope they have their $#@t together in their respective fields. I hope my clients expect the same from me.

My Investment Contribution Last Month Declined. My resulting emotional response is what this post is all about.

We all know that without investing it's tough to reach your goals. I bought two conservative exchange traded funds (ETFs); iShares Conservative Allocation and Vanguard Short Term Bond. If you're a client at my advisory practice, you probably own (or have owned) these ETFs in your accounts at TD Ameritrade Institutional. Literally the day after I ponied up my dough and invested, this happened:

The Greece Crisis (only Greeks think it's a crisis) worked its way into speculative market fears, and it was sending my ETFs into negative territory.

My Portfolio Barely Declined, But It Still Bothered Me. My account was up 18 cents last time I checked about a week and a half ago. But man! That first week and a half was painful. I hated thinking about money I'm socking away for next year's tax bills (as a small business owner I pay quarterly estimated taxes) being down.

In the past I never really gave much thought to the behavioral aspect of investing. But now I feel different. My wimpy decline was enough to keep me thinking about it almost daily. I joked about my performance with my wife, a few clients (thanks to the client who encouraged me to write this post), and two colleagues. Although we all laughed about my foolishness, the fact is I felt an anxiety I hadn't felt before.

As much as I wanted to do something in my account, I chose to do nothing. I swallowed the same pill I'd been asking clients to swallow for years. No market moves have been executed. No strategies have been re-worked. The reality is the goal of the money hasn't changed from last month to this month. As such, doing nothing in my account is / was the correct decision.

I Think I Can Relate In A Meaningful Way. I'm a normal person. Mostly... It's true that I struggle with most of the same issues my clients do. My mortgage eats up too much of my monthly take home. I haven't properly funded (read: retitled assets) my trust yet. I probably don't carry enough disability insurance. I'm working on all this!

Reflecting on my most recent investing experience, I have a new appreciation for how investors feel about market performance. I get it. Even if the intended use for money in the account is far off in the distant future, it's still easy to get worked up when markets decline.

Financial Advisors Need To Empathize More. Sometimes investors need a reality check based on logic and facts, with a dose of market history to "teach" them not to panic. But usually that doesn't work. Think of it like this; it's not like if I show you a chart illustrating the long term market returns you'll magically think "Greg's right. This 30% decline is no big deal".

My recent experience has taught me to approach conversations more like my wife does. She has a master's degree in psychology. She's exceptionally good at listening and understanding.

I think if I approached market performance and a client's financial struggles with the same mentality as my wife would, it would result in better client relationships. No promises I'll abandon 100% of my hard-nosed market sass so you can cry on my shoulder. But I'll do my best.

#investorbehavior