A big part of a financial advisor’s job is to be a release valve for their clients’ financial anxieties… it’s an essential aspect of how we add value in helping them manage their “behavior gap” and avoid making poor financial decisions for themselves. Because unfortunately, no matter how well we prepare our clients conceptually about the importance of keeping an even keel during the inevitable bouts of market volatility (or worse), the concept of “market risk” (and how clients will react to it) often feels purely theoretical until it actually happens… or as Mike Tyson so eloquently put it, “Everyone has a plan until they get punched in the mouth.”
And when market turmoil happens, it creates a huge amount of stress for clients, who oftentimes will then turn towards their advisors as they look for someone to blame. But while that can serve as the foundation for memorable “war stories” that advisors can bond over at industry events, the dynamic that isn’t discussed nearly as much is mental and emotional toll we as advisors face ourselves in serving our clients during severe market corrections or even deep bear markets. In fact, in the aftermath of the financial crisis, one study found that advisors ended out experiencing symptoms also associated with post-traumatic stress disorder! Which, in turn, raises the question: How can advisors prepare themselves mentally and emotionally to help not only their clients, but also themselves, cope with the stresses inherent in serving clients through their own times of stress?
In our sixth episode of “Kitces & Carl”, Michael Kitces and financial advisor communication guru Carl Richards sit down to discuss proactive steps advisors can take to prepare themselves to deal with and manage the stresses inherent in being a financial planning professional, some common but less-well-known sources of advisor stress, and how a subtle shift in mindset can help advisors make self-care a priority.
As a starting point, the best way to put yourself in a place where you’re able to deal effectively with the inevitability of stress is self-care, which only gets more important as we age and includes (among other things) diet, exercise, and rest (both physical and mental). Meanwhile, as an “accountability partner” who’s there to support and guide clients towards reaching their goals, you also need to have a support system that you can reach out to when things get tough, including family, colleagues, a mentor, and other industry peers. Because, just as your clients need someone they can vent to when it seems like everything is falling apart around them, you also need to have a group of folks you can turn to when you need to express your frustrations and anxiety. It also may mean allocating a part of your personal budget towards hiring your own “accountability partners” to help you stay (get?) fit, eat right, and establish a healthy work-life balance… which will almost certainly end out providing a positive ROI for you both personally and professionally.
Ultimately, the key point is simply to realize that as a skilled financial advisor, you are still no good to your family, friends, and colleagues if you’re stressed and unhealthy yourself, and you certainly won’t be able to provide the level of service that your clients expect… and deserve. And in order to do that, perhaps a smart approach might be to stop treating things like rest and recreation as a “reward” for working hard, and instead start thinking about those things as a prerequisite (that needs to be actively scheduled for on your calendar) for doing good work in the first place!
Kitces & Carl Video Transcript
Carl: Greetings, Michael, this is episode six of…
Michael: Episode six. I feel like maybe now we’re getting too excited as we just keep counting them forward. It’s like, “Oh my God. We’re still doing it. We haven’t screwed it up or blew it up yet. People are still giving feedback. What are we doing?” But episode six, here we are.
Carl: This thing called Kitces & Carl where we compare financial planning to pornography.
Michael: Yes, that was the slightly awkward cue we had on the recent episode. We’ve set a good bar to try to maybe lift the standard on this one, but we’ll see how it goes.
Carl: Right. Well, today, what’s good news is today, this episode we want to talk, I feel like I have appointed myself Vice President of unspeakable things.
Michael: Vice President of unspeakable things. So what…
Carl: And today we’re going to speak about…
Michael: …are we going to talk about today?
Carl: …some unspeakable things about diet, and love, and stress, and sleep. Like things that we’re not allowed to talk about, especially among men advisors. It’s just not allowed.
Michael: You do recall these are for financial advisors. This is a personal finance financial planning thing, like…
Carl: That doesn’t fit in a calculator? Wait. Wait, wait, wait. Well, here’s what I want to talk about. I want to talk about, I believe that a huge piece, it’s part of our jobs to be the release valve for other people’s anxiety. That’s going to be part of our jobs. There’s going to be times, and the reason why I want to talk about it now is it feels like it’s been a long time since it’s been a major part of our jobs. I know there’s been little micro scary markets, right? But there hasn’t been a, just like big old scary market in a while, and I think we’re forgetting how hard…
Michael: Just to be clear, I mean, you’re talking about this lovely dynamic we have as financial advisors where the market goes down and the clients take it out on us like a punching bag.
Carl: Yeah, yeah. Yeah, yeah. And I think especially… we can’t open this can of worms in this sort of episode… but especially if we claim that helping people manage their behavior is one of our values. One of the things that…our value add, if you will, that we can walk you in off that ledge when you’re about to do something stupid. Of course, we’d never used that language, but that’s sort of, if that’s really one of our jobs, then we’re going to have these moments where we’re going to have to be walking people in off the ledge. And no matter how well we train them, right? Remember, risk is an arbitrary concept until you experience it, right? And then my favorite Mike Tyson quote: “Plans are great until somebody punches you in the face.” So, what I really want to talk about is sort of making your…this is preemptive. It’s a preemptive strike. It’s a lifeboat drill. Like making yourself, I’m going to use one of my friends. Steph Gaudreau has a podcast called “Harder to Kill,” I’m sort of stealing her title. Like how do we…
Michael: Harder to kill.
Carl: …yeah, how do we make ourselves, as finance…people who do knowledge work, often very emotional knowledge work, and don’t tell me if you can’t remember, we’re going on 10 years now. But even people who went through the global financial crisis are already forgetting…forgot five years ago about how hard it really was.
Sources Of Stress For Financial Advisors [03:59]
Michael: It is an interesting dynamic to me just how quickly that pain fades and how painful that pain is. I think sometimes, I don’t know, we even forget or, to me at least, I think I underestimate it out of the gate. I started in 2000. So, I started right at the peak in 2000. So, my first three years out of the gate was three years of a bear market. And, there’s this dynamic that some clients really thought you were going to save them, and you can’t, and they have to go through a whole like, “I thought you were going to save me, you didn’t. What happened?” And beat you up about it. Most clients, even if it’s going well, need to vent, sometimes quite energetically, in the moment, just the sheer frustration, you’re watching your wealth go down and you feel powerless against it. We even did an article a couple of years ago on the blog of an interesting research study that found that there’s a documented phenomenon that particularly amongst some couples. One of the primary reasons an advisor gets hired is very literally to pass the buck and delegate the blame responsibility.
When I invest a portfolio and it goes down, my wife gets angry at me. So if we give the money to you, then next time the portfolio goes down, my wife and I get to sit on the same side of the table and yell at you, which feels a lot better than me sitting across my wife getting yelled at. So, there’s this blame game shift thing that happens. Actually, I think it’s a real value. You are preserving my marriage by my wife and I yell at you about the market’s decline. But it sucks to be on the other side of that punching bag.
Carl: Yeah, and I want to get… and we have the data that we can look at, that study that Klontz, and I believe Sonya Britt-Lutter was involved in that, too. Of the advisors they talked to, some number, like 90-plus percent, expressed symptoms, and I want to be careful because I think there’s a difference between Post Traumatic Distress…
Michael: Stress Disorder.
Carl: …Stress Disorder-like symptoms, and actual Post Traumatic Stress Disorder, right? I think there’s a difference and I don’t know enough to know the difference, I just know there’s a difference. But nonetheless, 90%.
Michael: Upward 90% of advisors showing PTSD-like symptoms. Elevated stress levels, difficulty sleeping, distraction in the workplace, in very material, disruptive ways, just carrying the baggage of, well, I guess, at best clients who unload on you, at worst, some clients who really won’t be able to achieve their original goals. Hopefully, we diversified them enough they’re not destitute, but, like, there were goals that may not happen anymore. And you’ve watched clients not succeed in everything they wanted to achieve on your watch. It’s hard not to internalize that as an advisor.
Carl: Yeah. And goals that might have been… you were sitting in the office when they cried about that, dreamed about that, got excited. I think to do this…I think…this is an opinion, I’m often wrong. Never in doubt, but often wrong. I think it’s part of a real financial advisor’s job to be invested in that, right? So you’re going to, by definition, you’re going to feel it. And then we have a study done about the same time, or a little survey done, not little, but survey done by Bob Veres about 83% of financial, he used the word financial planners, were thinking of changing away from buy and hold to…what do we call that now? Tactical asset allocation?
Michael: Yeah, yeah.
Carl: At a time when that would be the definition of the big mistake, right? Like you would be facilitating the big mistake. So here’s where I want to get to. Let me just, a quick little story. I remember, I’m going to call them, yeah, I’ll anonymize them by calling them Dan and Barbara. I remember Dan and Barbara, clients of mine, they had been clients forever. They called me Santa Claus because I helped them diversify out of an individual Quest stock when it was at 45. All their net worth was in Quest because he had worked there. It was at 45, I said, “Well, if you’re going to work with me, then you have to sell it.” He said, “Why? Because it’s going down? I said, “No, because I have no idea. It could go up. In fact, it probably will go up if I tell you to sell it. But it’s a principle, you got to sell it.” It went to three after we diversified. So he called me Santa Claus. Never a behavioral problem at all. Then ’99, didn’t get greedy, 2000, didn’t get scared, the impact of September 11th, none of that stuff. 2004 in emerging markets, none of that stuff impacts Dan and Barbara. They’re on a cruise in September, October of 2008, and this cruise left out of LA, so it had more retired people on it than normal. I don’t know why, that’s just what they told me. When they got to their first port and they got all the news, he said half the people flew home. And I was like, “Dan, listen.” I mean, he called me. And he never called me, was never stressed. And I was already dealing with…. you know what we were dealing with at the time?
Carl: So I was like, “Dan, listen. Just when you get back, there’s nothing to do now. I mean, we’re essentially in a lifeboat. Don’t jump in the water. That’d be kind of crazy. Just when you get back, come meet with me.” And I remember, and this is where I want to get to. I remember meeting with them and looking them in the eyes and saying, we had a diversified, low cost, scientific, evidence-based… all that stuff, all those things. I remember looking Dan and Barbara in the eyes and saying, “We’ve got to just stay put, right? Nothing about the way we invest money has changed. We’ve just got…” And this is the part I really want to talk. I remember closing the conference room door, and for the first time in my entire career, saying to myself, “Oh, man, I hope I’m right.” Right? Like that feeling of, “Yeah, this is scary enough that I’m actually ladling on, I’m using the only positive use I can find of overconfidence.” Right? In a moment when you’re not confident but you have to be because you got to get people to behave correctly. That causes some internal…it’s tough. So the question is, what do we…first of all, have we hit it home? Have we pounded it into the table enough to say, “Look, this will happen again”?
Michael: Yeah, I think we all kind of inevitably accept the markets will not actually just go up every year for the next 10, 20, 30, 50 the way they, God bless, have managed to for the past 10, and that when it comes, it’s going to hurt. I think advisors who’ve been through it before, it fades from memory a little. Maybe some of these stories started back up…Well, God, I mean, anybody who has been doing this as many as 10 years, who hasn’t seen the full-fledged bear markets and how traumatic it is, we can only say so much because may just have to go through it once, unfortunately, to quite internalize the level of stress. But I guess even for those folks, and certainly for the rest that have been through the cycle once and had their PTSD-like symptoms, what do you do about it?
Carl: Yeah. That, I think, is the…and just on a final note on that, I’ve actually had sort of a surprising number of comments about people who have gone through it who are actually worried that they can survive this sort of work, because we know a lot of people leave the industry because of this. We lose a lot of people because you can’t handle the stress of taking on someone’s goals and dreams, and then providing guidance.
Ways Financial Advisors Can Prepare Themselves For The Stress Of The Job [12:48]
Essentially, it’s your job to give mission-critical advice in the face of irreducible uncertainty, right? There’s no way to get rid of it. You’ve got to give it. So, what do we do? And to me, I think this gets to these unspeakable things that we just don’t seem to spend much time talking about in our industry.
Michael: Such as?
Carl: Yeah, for instance, I got asked to speak at a…everybody listening to this would recognize the name of this gigantic firm that is public but used to be a partnership. They asked me to come speak at their resilience week.
Michael: Resilience week.
Carl: Every year they do a resilience week for all their investment banking partners and all their wealth management people and their whole crew around how to build resilience. And I just think it’s a conversation we need to be…and maybe it’s just my age. I’m staring 50 in the face, three years from now, thinking I’m in a better place physically than I’ve maybe ever been in my life. Part of moving to New Zealand was, that was part of the goal. But it’s been through diet, strength training, and time outside, and I’m still not getting great sleep, but that’s the next domino to fall. So why…
Michael: I hear 16-hour time zone changes are tough on the sleep schedule too.
Carl: Sometimes it’s…and the travel, it’s a bit…But so, to me, these are really simple things that we keep bumping up against in our industry. I think we talked a bit about this when we talked about social media. Really simple things done repeatedly over time have a massive impact. I’m just sort of, I don’t know what the right word is, “begging.” More and more I find myself sort of begging colleagues and friends to take this seriously. You can’t keep running at the pace you’re running. Here’s what I think. If you have no air, to use a mountain bike analogy, right, or a car, right? If you have no air in your shocks, when you hit a big bump, there’s consequences.
Michael: It hurts. Yeah, it hurts.
Carl: So, what do you do? What have you seen…because I know you’ve made some changes health-wise over the last five years that have been impactful for you.
Michael: Yeah, trying. Certainly, I think there is that point, I don’t know. Well, I don’t want to over generalize to men. I’ll just say at least in the context of men, since that happens to be the gender I’m more personally familiar with. I think there’s this piece for us. In our 20s, we’re invincible, and God bless, our metabolism is still freaking awesome, we can eat what we want and do what we want. And then your 30s hits and everything frickin’ slows down. And all of a sudden, weight starts adding, we can get away with it, hopefully calling them dad bods. But, some weight starts coming on, our activity levels sometimes go down a little. It seems to only get harder. Hitting 40, haven’t done the crossover to 50 yet, you can let me know how that goes in a few years. But there’s this shift to me that happens where you have to start paying attention more to health and the rest that’s going on. It just it starts to be more impactful.
I turned 40 and it kind of freaked me out a little because my grandfather never did. Died of a heart attack when he was 39. And shortly after my 40th, one of my best friends from high school had a massive heart attack and, God bless, survived, but almost didn’t. And it just, life starts to, I don’t know, come at you a little faster and thinking about that on top of…oh yeah, and that’s when we’re all feeling good. Now wait for the market to go down and watch things get really stressful. Yeah, I think the health dynamic has hit home more for me. I bought a standing desk. I wrote about that a few years ago when I did it. I’m all standing desk now, I managed to drop some weight for that, then I traveled more and it came back a little, so now I’m trying to work it back down again. But, I mean, to me it’s two pieces. It’s suddenly caring a little bit more about what you’re eating, and how you’re taking care of yourself, and whether you’re exercising.
And the other part to me is, we help our clients because we’re this accountability partner, this social partner that takes the other side of the relationship and tries to hold them up. And to me what that also means is that if you want to get through these tough time as an advisor, you need your support system. We are our client support system. We need a support system. I’ve always observed that, even from advisors out of the gate getting started, I found one of the single greatest things that predicts advisors who don’t succeed in the first three years is that their spouse is not on board with them taking this job, or a career, or industry. Those first three years, heck, never mind the bear markets. Just getting nine million nos to get your first three clients is so harsh and so stressful and very much the same way. It’s like so much negativity that you have to work through that if your spouse and family are not supporting, I mean, not that they have to give your clients, but they have to be willing to be your sounding board and just your support system when you come home feeling beat up after another day of not getting the clients that you’re trying to get to, if you don’t have that support structure of spouse, or at least close friends, close buddies, close girlfriends, whatever it is that gets you through, I see a lot of advisors that don’t even get through the first three years, never mind what happens when the bear market comes.
And then I think you can layer on top of that, having colleagues in the industry, having a study group, having a mentor, having other people that you have that you build relationships with that you can reach out to when it gets hard. Because inevitably it will, just because life never moves in straight lines, right? You’ve got the lovely graphic behind you of, how business is supposed to go and then like the squirrely way that it actually goes. So, we all get at least some of these setbacks just because life happens and business happens. But then when you get the compounded piece of, and your clients want to dump all of their fears and stresses and anxiety and anger on you, and you have to absorb that, how are you unloading it and diffusing it down the line, and what is your social support system and structure in place so that you have a place to go and vent when it gets difficult? It’s essential for mental health.
Carl: Yeah, yeah. I was just sitting here thinking, “I wonder how many people this resonates with.” This would be really, for me if I can sort of beg all of you watching this, if this is important, like just a simple thumbs up or an email. You can email me at [email protected]…just use [email protected] for this one. [email protected] Just tell… and use the comments, the comments below.
Michael: Comments below. Scroll down, comment, comment, comment.
Carl: I would really like to know, because to be honest, if there’s only one person that this has a massive impact on, I’m super cool with this, but my sense is, and that’s why I’m telling you, you can email me so you don’t necessarily have to put it in the comments below, because none of us will unless he’s going to do it anonymously, but my sense is I have this happen at conferences where I’ll speak about this and everybody just has their arms folded. And particularly among a room of, unfortunately, still predominantly men, right? Arms folded, and no, it’s not a problem with me. And then that evening, person after person after person after person comes up, borderline tears like, “I don’t know what to do.” Right?
Time For Yourself Is A Prerequisite, Not A “Reward” [20:58]
So, I think there’s just a couple of things that would be maybe good to finish on. One is, think of that stuff. The stuff. Whether that’s finding a coach. Whether it’s getting a good strength coach. I spend more money on a strength coach than I will…we’re going to do an episode soon about our own financial habits, and I will not tell you how much money I spend on my strength coach. Actually, I will, because the ROI is, I can directly trace it. Right? But time off, time outside, a nap…. whatever it is for you, a walk. Let’s stop thinking about that stuff as a reward for doing good work, and start thinking about it as a prerequisite for continuing to do the work. Because it is.
Michael: That’s an interesting way to frame it.
Carl: Yeah, you can say to a spouse, a friend, a co-worker, “I’m going on a mountain bike ride.” It’s work. Right? I just scheduled the appointment on my phone. I don’t have to tell anybody, “I’ve got a meeting I got to go to.” I have two hours of meetings a day out there. And if I don’t, I won’t be able to do this work, knowledge work in general. So I just think that idea, whatever it is for you, it could be a simple walk, it could be New Zealand. I was just, commenting to my wife again today, I was walking to work at 10 a.m. on a Monday and everyone is outside because it’s morning tea. Right? Work stops. You grab a cup of whatever you like to drink and you stand with your friends. Whatever it is for you, start thinking of it as a prerequisite, not a reward. It’s an investment, not an expense. The money I spend on Glenn, my strength coach, is an investment. I want to spend more with Glenn, right? So I think that’s helpful. At least that’s been my little trick.
Michael: Yeah, I love this idea of just putting on your calendar, “Business meeting, business time,” and…
Carl: Business time.
Michael: …it is go take a darn walk, or a bike ride, or hit the gym, or whatever your thing is. Just get out of your four walls, get some fresh air, get an opportunity to blow off some of the steam. Not just because you need to or it’s a reward for a hard day’s work, but because, I love how you put it. It’s a prerequisite for a good day’s work. Or at least a prerequisite for tomorrow’s work to be good, if you’re literally doing it at the end of the day.
Carl: Yeah, yeah. And probably a prerequisite for you to keep doing this work three years from now is when it will show up, right? And it’s not self-indulgent. We have so much guilt built around, this Puritanical work ethic guilt built around this. And it’s not self-indulgent, it’s not lazy, whatever it is. And please also remember, this is me speaking to me, that the times at which you most need it are the times at which you are least likely to feel like doing it.
Michael: Right. So make the habit now.
Carl: And then even when you have the habit, you’re going to be like, “Oh, I can skip that today.” That’s a sign, a flashing sign that should say, “If I feel like not doing it, it must mean I really need to.” So, anyway, that’s…I would love to hear more about how people have handled that. If it’s really a thing. Are we getting lazy or is it just me?
Michael: I hope people will, as we said, put some comments down below or email us or share or something. Does this resonate with you? Or just, what do you do to keep the sanity? I think I’m particularly curious to hear from advisors, no offense those who’ve been doing this for a while but haven’t been through one of these cycles yet, but if you have been, I guess, 12-plus years in, so you remember prior to the global financial crisis, then going off the roller coaster cliff, what did you do to stay sane and grounded? Or frankly, if you didn’t, what have you learned from that that you’re going to be doing next time? So share that, whatever you’ve learned. I think we’re all trying to figure out. Share whatever you’ve learned, so hopefully, we’ll all get through it a little better next time.
Carl: Amen. Let’s wrap. That’s a really fun conversation. Thanks, Michael.
Michael: Absolutely. Thank you, Carl.