In this article we’re going to talk about overcoming (paper)loss and massive uncertainty with your finances – a topic we’ve been covering quite a bit with our clients lately.
We’ll also touch on:
- What’s being said around the web
- What drives financial chaos
- And what we’re recommending our clients do in this moment
Now, more than ever is when our clients need us and the conversations that we have with clients can make all the difference to their finances for their retirement.
About Us
Before we get started, allow us to give you a bit of context as to what we do.
Our firm works with hundreds of clients, across varied age groups (most around their mid 40’s and 50’s), all with unique situations.
Our role for our clients is to provide them with the right information so that they can make informed decisions about their finances now and into the future.
Now, let’s kick things off with what’s being said around the web.
Around The Web
If you were to seek out financial advice online right now, you may find messages like “Don’t Sell, Hold!” or “Sell, sell, sell, it’s going to go down by even more!” even, “What stocks are you buying? I bought X yesterday, they’ve already gone up 20%. You should definitely get around them – try these ones next.”
It’s amazing to see the alarming number of people who are making ill informed decisions around their finances during this time.
During a crisis, your financial decisions can either haunt you or become celebrated.
The danger of listening to online advice becomes evident when we look at what happened in 2008 when 33 of the top 100 companies on the Australian stock exchange ceased to exist beyond the GFC. Most of these companies sold or merged. No one could have predicted that in 2007… These are blue chip companies with long term histories.
So, whilst it’s tempting to listen in on the hottest tips from the ‘online gurus’, sometimes there are larger forces at play.
Nobody Knows You, Like You
All of the noise during a financial crisis somehow manages to completely miss the most important point… No-one knows you, like you.
The fact of the matter is, no-one knows what is going to happen tomorrow or the day after that. And for that matter, it’s likely that they have no idea about you or what your day is going to look like tomorrow either.
Our Need For Certainty
The challenge begins with our pursuit for certainty. That’s right, certainty, not happiness. It’s that sure thing that makes us feeeel good; KNOWING that we have made the right decision in that moment.
And this would be completely fine, if our lives were linear. But they’re not. Not in the short term. Just look at the exponential Coronavirus graphs right now. Sometimes life feels like it’s moving at ground breaking speeds and you’re struggling to keep up. Other times, it can feel like you’re chained up.
Unfortunately, our craving for certainty is the same force that causes us to make costly short term decisions during a crisis – like moving all of your super to cash.
In the short term we act quickly because, as Art Markman from the Harvard Business Review describes, we’re wired to respond to threats.
Our brain thinks “OH GOLLY! I MUST RESPOND TO THIS NOW”. This is our caveman brain attempting to protect us from loss (pain, starvation, danger, death and paper loss).
So, what do we do? We buy hand sanitisers to protect ourselves. When that runs out, we keep running down the list to the next logical thing to act on, until we end up at toilet paper…
We talk about this constantly with our clients. And over time, they have come to accept that they cannot control what happens in the short term. But they do know that they can have some control over what happens in the long term with well thought out and carefully planned decisions supported by intelligence and logic – not caveman like reactions.
And what we’ve come to understand is that everyone craves something different.
What Do You Crave In A Crisis?
We all crave certainty in different ways and that’s why we seek out advice – so that we KNOW what we can do to achieve that certainty. Or at least become more confident about our decisions in getting there.
Some of us crave certainty via a guaranteed income, and you might find these people in ‘safe government jobs’ whereas someone who requires less certainty around their income may be an actress or gig worker – this type craves variety in their lives. Some people simply want to know that their family will be safe – as we all do.
So, what do we advise our clients to do in a financial/health/food crisis to get what they crave?
How can they KNOW what’s right for them?
Our advice?
Talk It Out
First, you talk it out.
To achieve true clarity and certainty in what you want and/or need in a crisis you must talk it out.
At least that’s what we’ve been doing with our clients.
First we take all of what’s going on in their head and allow them to verbalise it.
If you’re considering doing this, it’s recommended you talk to someone you know or can trust and you might also choose someone who can offer you the advice you’re looking for.
When you get this right, we’ve got to say, the results are astounding!
We’ve witnessed people go from a truly scared state of mind, worried sick, to becoming a calm and centred again, all in a matter of moments! Sometimes we might even have this conversation with the same person once a month while challenges continue to arise.
As they say, if you’re in your head, you’re dead!
And the numbers say it all – 80% of people who get financial advice feel more confident about their financial decisions (AFA, Value of Advice)
You might be thinking, “Well that sounds great and all, but what are the real things, the details (and secrets), that you’ve been discussing with your clients?”
Here it comes…
Finances – What Have We Been Advising Our Clients To Do?
Obviously, we talk about the nitty gritty of finances a lot with our clients; things like superannuation (and their fluid balances) cash flow, jobs, investments, business and so on.
We’ve been talking with clients on the phone and via our new favourite tool, Zoom! We have video calls wherever possible so that we can still maintain some Face 2 Face connection in this socially distant world.
So what’s our advice been to clients at this very moment?
Well, it depends.
Everyone’s situation is different and part of our role is to provide personal advice that matches our client’s situation.
The advice for someone in their 50’s could be a complete backflip to someone in their 20’s, even someone in their 60’s for that matter. Even more so, the advice for a pair of individuals in their 50’s could be dramatically different…
So where do you draw the line? What general advice can we give you right now?
We do follow some general investment rules with our clients and we have a very structured and strict rule book (24 pages long to be precise) to follow whenever we work with a client to invest their money on their behalf.
One rule that we recommend following as close as possible is, never lose money. Sounds simple right? You would be surprised at the number of people that willingly lose money due to a short sighted judgement brought about by fear.
Buy, Sell or Hold?
For some clients it is/was the right time to sell. Some clients we help to remain calm and weather the storm to come out stronger on the other side.
For others that may have been sitting on the sidelines, we might encourage them to reconsider their position in the market and become more active. It truly depends on your circumstances.
The Role That Fear Plays In Our Decisions
What begins to surface during conversations in a crisis, when the world isn’t all roses, is that everyone has some level of fear about the future – an uncertainty about unprecedented times.
Fear can flow through us in the form of stress and mental numbness to anxiety and even tears.
It could even be the fear of missing out (FOMO).
It’s a very common emotion and we can’t remove it from our human psyche. We can, however, learn to manage it and accept a level of fear that we are comfortable living with; a level that allows us to sleep easily at night.
In relation to the investment markets, which have generally been beaten and bruised over the last few months, fear plays the role of driving the markets down and greed (sometimes FOMO) drives prices higher.
Even the strongest men and women may be experiencing fear during this time. And there’s absolutely no shame in this! We especially encourage the strong men and women to come out of the woodwork during this time. Don’t bottle it up!
Our conversations aren’t always peaches, but they generally end better than where they started.
Our Role During A Crisis?
Our role during a crisis is to firstly empathise as a human being and then engage as a financial adviser to help guide people to make the best decisions towards their individual finances.
If you feel somewhat unsure or even numb about what to do with your finances right now, there is a way out. And it starts with a conversation.
To achieve resolve, pick up the phone and give us a call. We will be able to help ease any concerns around your finances, just as we have for our clients and many others.
We won’t be able to give you specific advice, but we can help you to understand what’s going on out there in the world of investments, superannuation and all other matters finance.
How Can We Help You?
A chat with one of our advisers can help you to get all of your financial concerns off your chest.
We have been providing this service to our clients for the last couple of weeks and it has done wonders for them.
We’ll be opening this up to everyone who calls until the end of April.
If we’re able to keep up with the demand after then, we may extend this free offer for another week, but unfortunately we won’t be able to do it forever.
Closing Remarks
We understand the challenges and uncertainty that people are facing around their finances right now and, while we can, we want to help.
We invite you to pick up the phone or book a Quick Chat with one of our advisers today.
Talk then,
From Tim and The Team at Financial Framework
