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Imagine taking a hike in a forest and suddenly realizing you are lost. “Where am I? How do I get back?” It is a scary feeling. But you take comfort in knowing you can find your way out. Thanks to your GPS, you’ll be home before dinner. Your trusty GPS has never failed to help you out when you are lost. It’s reliable, and you’re safe.
Now imagine the same scenario, except this time, you have no GPS. You have no idea how long it will take you to get out of the forest, or if you will ever get out safely. How much more terrifying is that? That’s where people are right now. They have nothing reliable to help them feel safe.
Investors had a plan they believed in. Save regularly, stay diversified, and everything will work out. Markets will fluctuate over time, but they always recover. People know the feeling of market volatility through experiences like the dot com bubble, debt implosion, and commodity price volatility-familiar triggers that cause the market to take a tumble. But they know that the market is a cycle, and they take comfort in knowing it will reliably go back up, eventually.
This time, a worldwide pandemic drives the bear market. Do you recall anything remotely close to this type of trigger? I don’t. And people can feel the difference. They hear the virus may come back for round two. Or even that it may be around for years. Or that it will mutate into a new virus. The continual message they are hearing is that life will never be the same. So they ask you: what if this time, the market doesn’t recover for years? What if this time, it’s different? In many ways, they are right: this time, it is different. There is no GPS for this one.
As I wrote in my previous Changing the Conversation article, people hate uncertainty. Let’s dive deeper into understanding what makes the pandemic different, and what we can do to help.
It has been said that the difference between a recession and a depression is whether you lose your job. Some people experience little or no hardship during a recession or bear market. It’s something that happens to other people. That’s not the case with a global pandemic. This isn’t just happening to my family and me. It is happening to everyone everywhere. The vastness of the effect makes it different from anything we have experienced before.
During recessions and bear markets, advisors watch data closely. We look for evidence that things are improving, signs of recovery that imply this too shall pass. The stock market, being a leading indicator, often recovers long before the news turns positive. We construct a timeline in our head, and it gives us hope. But this time, economic data is not enough. The slowing economy is a consequence of the problem. We cannot fight a virus with economic stimulus solutions. Lowering interest rates and printing money is not a cure. This time, it is different.
So what can we do to help people with the terrifying uncertainty they are feeling? How can we help them feel less vulnerable? Sharing data of past bear markets or highlighting recent gains with clients has limited value. We need to change the conversation.
Instead of telling people what you think will happen, ask them how they are feeling about everything. Yes, I am suggesting we talk about feelings! Being heard and understood is more helpful than discussing the average length of a bear market.
Embrace uncertainty when answering questions from clients. Get comfortable saying, “I don’t know” when they ask you all those questions that you can’t answer. Communicate that you do not know the answers, and model being okay with that uncertainty.
Finally, provide hope for your clients. As I stated before, it is the people of the world against the virus. I believe we will figure it out because that’s what people do. That we can rely on.
My money is still on us.