Fear Factor | April 2002 Cover Story Sidebar

Cover Story Sidebar: Fear Factor

Back \| E-mail to a Friend \| Print

Wall Street woes, Enron, recession. Spiraling energy prices, Sept. 11, war. All these factors have stoked consumer fear of equities markets -- and market-linked products such as variable universal life. While some savvy investors and variable product owners have viewed the economic downturn as an opportunity to buy more shares at lower prices -- thus creating opportunity for larger down-line gains -- many more consumers have gone into financial paralysis, says Kathleen Gurney, Ph.D., and CEO of financialpsychology.com. "They're afraid to make any financial decisions right now for fear they will be the wrong ones."

"They are scared they will never be able to retire; they are puzzled as to what to believe and from whom," Gurney explains. "What's worse, they don't know what to count on in their future. They are torn between spending even what they can't afford so that they can enjoy it now vs. being conservative and depriving themselves to make up for what they have recently lost. They're over-spent and over-wrought with fear. Many are scared that their cash flow will be affected as well as their portfolio."

How can financial advisors deal insightfully with these concerns? Gurney, who has studied the psychology of money for more than 20 years, offers the following tips on dealing with investor fears:
Remind your clients that not making dramatic financial changes at this time can be a sign of patience and prudence, not cowardice. Acknowledge your clients' concerns and fears, while cautioning against impulsive and ill-considered actions.

Help your clients develop a sense of perspective. Economic conditions have always fluctuated at times of national crisis, but the underlying strength of the American financial system has always shone through in the long run. Hardships caused by recent events will not last forever.

Take this opportunity to review each client's financial situation, to advise him or her regarding any changes that might need to be made. Taking small constructive actions at this time can help your clients feel as if they are in greater control.

Step away from your knowledge base and empathize with the average investor who has lost perspective and confidence. Many have had to give up their dreams and that's depressing. Make contact, be patient and listen for the telltale signs of stress and anxiety.

Remember that some clients are capable of acting out their emotions and sabotaging themselves. But they don't want to hear that. Avoid critical comments like, "You have to understand that you're reacting too emotionally right now. The market always bounces back; stick with it." Instead, say, "Yes, I can relate to how you're feeling. Let's make sure we continue to communicate and deal with these issues until you start to feel more confident that the strategy you choose is in your best interest."
Sound advice, delivered by sound advisors, can make the difference between fear-based financial paralysis and knowledge-based financial success. Gurney says, "As advisors, we have a responsibility to the public to set an example of stability, foresight and common sense."

Top | Back | E-mail to a Friend | Print

If you are not receiving your magazine or need to change your address,
please contact membersupport@naifa.org.

For comments on articles on this website contact mleyes@naifa.org.