Investment Advisor Stress Disorder (I.A.S.D)
With so many damn syndromes/disorders out there these days including “The Dummy Donald Self-Inflicted White House” variety, I reckoned that the royal ‘WE’ deserved one of our own. As a broker in days-gone-by and as a long serving ‘suit’ I have observed many influencing factors that plague IA’s during the building and keeping of their business. They are all out there and very recognizable. To be able to embrace and cope with industry elements which create stress is quite an achievement. The causes as enumerated hereunder are not simply obstructions a rookie IA has to contend with; from one decade to another they are there for all to contend with and in many cases they can bring serious consequences. Have a look:
— Losing Other People’s Money
If there is a market direction an IA would favour above all, it is UP. In dealing with clients it is “UP” that brings happiness, satisfaction and a job-well-done pride. The opposite of ‘up’ is, of course ‘down’ and that is not a direction built into broker psychology. Facing losses in a client’s portfolio can be very different for some IA’s as it smacks of failure on a personal level. Its’ effects can evolve into guilt and some advisors will hide from that feeling and then hide from the client. The cure for this disorder is for the advisor to recognize that most clients recognize that there are risk factors in investing; without accepting that adjustment the broker will invariably leave the field.
— Family Issues
Always the family is first – especially in this business. Regardless of where one starts a career as an investment advisor the amount of time and effort involved in establishing a viable practice is significant and most definitely impacts the time needed and required for a healthy family model. The number of hours in a day are often not enough for the start-up years and very easily roll into the family hours. The lack of time and concentration spent on the family will invariably bring stress to the table. Similarly, in the early growth years the level of earnings will be on the low side and building a clientele is a long game especially for a second career type who initially will be taking a significant revenue hit. Money or the lack thereof has stress built into its definition and can be a game-changer for the family unit.
For the millennials and second career types entering the advisor market the key to family unity lies in preparedness for sacrifice and on a lesser scale, building a war chest for the long haul.
— Rejection
Without question the “no” factor in prospecting can be and is daunting. First off, there really aren’t a lot of brokers who are good at prospecting regardless of the methodology. The number of printed words on how to handle or overcome this problem (i.e. cold calling, stand-up skills, etc.) is staggering, but ‘no’ is still there in the psychology of selling. For many the rejection factor can build a wall of what used to be called “door knob” fever. Often it can appear as an ego crushing barrier and can kill confidence, while there is no easy remedy for this affliction the answer certainly lies within the broker’s grasp of self-worth and survival instincts. When a wall of “NOs” is standing in the way, go around it and leave it behind.
— Peer Pressure
This rather basic, but stupid fact of life in the workhouse can also cause stress and disorder as it relates to the state of one’s self confidence. Enter unimaginative management who really believe that by pitting their Greyhounds against their Basset hounds will build and deliver that raw competitive spirit. I remember one Greyhound from years ago who would commiserate with his fellows on the stress and difficulty of earning a living in a very tough market. It was like they were all huddling together in their misery until the branch revenue results were posted – invariably the bemoaning peer ended up at the top while the majority languished in the also ran column.
The answer to this most basic human condition is to put on ear-muffs and blinders and stick to the knitting that is in your control. Sooner or later (the firm permitting) the Basset hound will move up the line without tripping over his floppy ears while trying to catch the slick Greyhound with a great elevator pitch. (I’m sure there are some old dogs out there who know who that Greyhound was)
— Fear of Failure
Fundamentally and psychologically this is the issue where the rubber meets the road. We all start out in the elementary school yard playing some sport or another. And, it is fun because that is what it is supposed to be. Unfortunately, sooner or later someone with a whistle in their mouth shows up and starts dividing the players into teams. The teams are now taught how to play together in a winning fashion and ultimately winning will be the deciding factor as to who is on the team. You get the idea, eh!
Somewhere along this line of life between a parent, a spouse, and a boss, the player who is now an enthusiastic investment advisor is faced with the pressures not encountered in an earlier space. There are signs everywhere that failure is not an option because that option only belongs to losers. This stress goes really deep and it hurts. The remedy? Stop kicking yourself in the teeth and enjoy the experience of failing; the lessons learned are irreplaceable and successful IAs will use them to get back on their feet and start finding fun again.
— Market Volatility
Hey – What the Hell! Things in life go up and down, right? Absolutely; that is right and is nowhere more visible than in a stock market. Certainly, any advisor with a pair of eyes knows that the squiggles on a price chart indicate movement and it is volatility of that movement which will cause consternation. The old adage of ‘even with a crystal ball – no one really knows’ is actually what can make a broker’s day more challenging than many jobs that entail doing things by rote. But, the harshness of some market cycles is what brings unhappy, confused and fearful clients to the broker’s doorstep. The pressure of not having a comforting answer will build stress factors as he/she anticipates the next big one. And, of course, that usually happens when the advisor is off on an enjoyable vacation which, of course, will now be cancelled. Hey, what the hell – buy GICs!
— The Incessant Demand for Product Development
Product development in our business is certainly not a bad thing. Even “good thing” Martha would have agreed before she went to jail. The problem really lies in the advisor’s ability to gather and understand the knowledge required in a new product even if they have NO intention of utilizing it in their own practice. The pressure emerges when the firm makes the understanding and use of its product either enticing or mandatory. Secondarily, pressure can come from the clients who may believe that a Hedge Fund should form part of their holdings whether it does or does not. Whether it is the client or the firm who is focusing on new product lines it is the advisor who has to find the time to balance their service offering. Building the right controls into a broker/client relationship will bring that balance forward to avoid the build-up of product stress.
— Hitting the High Bar
This is very much a today issue. Not because the raising of goals didn’t exist in the past, but because the firm’s intended consequences of not hitting the ever-changing targets of today are having devastating results and the resulting stress factor on all brokers is immense. Pretty well every week I receive a call from an advisor who has not only seen the “writing on the wall” as to their continued employment (lack of production), but have been given a pair of eye glasses by their branch manager so they can see the message printed on their office window. With some large firms unceremoniously tossing $400K – $500K producing IA’s out the door after their morning coffee, others are striving for a more humane kill by allowing the writing on the wall to last for a few months versus a few minutes.
Regardless, the stress disorder which accompanies the upward movement of asset and revenue goals is hitting a much broader range of producers. The consequence or maybe the answer lies in alternative, more independent models from which advisors can service their clients.
— Change of Ownership
I did an article on this a ways back (see CHG website) and I have been through a number of these myself. It all sounds fairly simple, but in truth it is not that simple for the IA whose firm has just been bought. The stress factors to be encountered start with the clients who get really ticked at the re-papering process, the client who has bad history with the buying firm or the client whose holdings don’t fit the compliance criteria of the newly formed firm. And then with a change of ownership will come a change in personnel which will start at the top of the food chain, work down to hands on middle management and into operating and support staff. If the broker is not feeling the discomfort yet there is then the broker her/himself. This will come to realization when the advisor learns where they fit into the buyer’s retention plan and the fact that while they are the asset that has been bought, they have no voice in silly issues like retention dollars. Finally, the straw that takes the advisor’s stress to a new level – their services are no longer required a/o they’ve been piecemealed off to a “C” level firm for a penny farthing. Yes, it is that simple!
— Regulatory and Operational Hell
I’ve saved this for last because it belongs on everyone’s table and is served up as a meal designed within a constantly changing menu. Nothing really un- jangles the nerves like the regulators wanting to have a chat with an advisor because a sixty-nine year old client doesn’t remember giving authority for trades in the last three months. The regulators appear to have achieved their wettest of dreams by casting a net of guilt over the everyday practices of investment advisors. And even worse the broker who is supposed to feel some measure of his firm’s good faith finds that the corporate umbrella folds up pretty quickly when storm clouds appear.
And then there is the back office of everyone’s nightmare. Hand in hand the compliance department and operations have effectively shot down any semblance of organization in the everyday life of the broker. The impact of the firm delivering a sub-par client experience can be beyond frustrating on the part of the broker’s support staff. The weight of back-office incompetency creates a continual level of stress as client deterioration steps in. Better to stop the dialogue here on this one because it really has no satisfactory ending.
— And Finally
So, where does all this stress and disorder lead? Well, the fact that there are still a goodly number of resilient advisors still standing in our midst is a testimony to their tenacity, their patience and their ability to over-come adversity in a various forms within the business. I have always said this is a simple business, but it is not easy. It is certainly within our grasp to challenge and change those previously described stress factors; I believe it is achievable and mandatory for the industry to address the disorder present in a very key component of the business – the investment advisor.
Brian L. Curry, CEO
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