The majority of people function better in environments that are stable and predictable than in ones that are chaotic and unpredictable. People become uneasy when there is a lot of ambiguity. It’s hard to make safe assumptions about where to put your money these days. Investors may become fearful and uncertain due to a variety of disruptions.
Although they are in a difficult situation, financial advisors might be useful at these times. Despite their expertise, they are not all-knowing.
Lisa Kirchenbauer, a certified financial planner in Arlington, Virginia, stated, “There is no doubt that clients are more anxious than ever.” Since many investment [and] economics conventions seem to be blowing apart, this is not a good time for counselors. Even though we’ll probably get through this uncertain period, it’s difficult to be without the answers. Advisors must be at ease with ignorance in order to guide customers through uncertainty.
Advisors must control their own anxiety before they can assist clients in overcoming uncertainty. Giving counsel when they’re as confused as their clients is difficult.
For Hazel Secco, overcoming uncertainty begins with meditation in the morning. Secco, a certified financial planner in Hoboken, New Jersey, may assist customers in maintaining their sense of reality by maintaining a cool head. She provides them with coaching on how to overcome cognitive biases and adhere to the financial plan she has created just for them.
“During uncertain times, people want to find answers,” Secco stated. “So they pay more attention to outside noise, which can heighten anxiety.”
By encouraging individuals to think strategically about the long future rather than responding rashly to the near term, Secco refocuses their attention on their financial goal.
Clients may become disoriented if control is lost. To combat uncertainty, some advisors assist their clients in regaining control over their lives.
Moore, South Carolina-based certified financial planner JW Harris employs what he refers to as a “circle of control” exercise. He draws three concentric rings on a whiteboard after clients have identified their financial problem.
What the customer can control is represented by the innermost circle. Things the client can influence make up the next circle. Everything that is beyond their control is represented by the outermost ring.
“The adviser needs to shift the focus to the innermost circle,” Harris stated. “The outer circle is not worth your time.”
Additionally, he exhorts his customers to substitute appreciation for feelings of uncertainty. It takes less mental energy to worry about an unknown future when you acknowledge your blessings. “It’s reframing your thought process,” Smith explained. “It’s replacing uncertainty with a measure of control” that results from being appreciative of your possessions.
The way you say to yourself also matters. When faced with uncertainty, you may tell yourself that “all signs are flashing red” and “we’re doomed.”
Pessimism, however, is a bad coping strategy. “Uncertainty doesn’t necessarily mean catastrophe,” Lansing, Michigan-based certified financial planner David Shotwell stated. “Our brains lead us to assume the worst possible conclusion, while reality usually steers a middle course.”
Shotwell struggles with ambiguity as part of his work, much like many advisers do. He tries to set an example for his customers on how to deal with uncertainty without becoming paralyzed by it.
Shotwell outlined his four guiding principles for investing years ago. He bases himself on these fundamental ideas during turbulent times:
— In the short-term markets are unpredictable. The market will move based on the day’s headlines and people’s emotions.
— The long-term is positive, based on economic growth, productivity, and technology. And the long-term positives outweigh the short-term volatility.
— No one can accurately time the markets consistently. Build a portfolio for all seasons.
— Risk and return are forever related. You can reduce your risk but you also need to reduce your long-term expectations.
“I share them often in my blog posts and in my conversations with clients,” Shotwell stated. In a world that is changing quickly, these unwavering values offer stability.
Additionally, Shotwell handles language with care. Speaking and thinking in unbiased, logical words makes it simpler to face uncertainty. “It’s thinking of things as neutrally as you can,” he stated. It is advisable to “use language in your own head, and with others, that ‘decatastrophizes'” in order to avoid making unrealistic assumptions.
For instance, try saying “it’s a challenging time for the market” rather than “the market’s headed for a horrible crash.” The tension that comes with uncertainty can be reduced by sober communications. Even better, it makes you more resilient so you’re prepared for whatever comes next.
