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The “five stages of grief” typically are associated with death and dying – individuals struggling through the harsh realities of facing a terminal disease.  These days, investors seem to be facing a slow death too, as they watch their portfolios and retirement savings evaporate before their very eyes.  Advisors, in turn, must add to their normal roles, playing doctor and psychologist while they help guide their clients through these gloomy days.

Intense market volatility, the never-ending downward spiral in stocks, the unsettling global economy, the “gloom and doom” talks about another Great Depression.  Such challenging times aren’t for the faint of heart.  These days, most investors experience some form of the “five stages,” some on a seemingly daily basis. 

Denial: Heck no, the market is not overpriced.  Each selloff represents a great buying opportunity.  Dow 20,000 here we come!
Anger: How could my advisor not warn me about this?  There was way too much risk in my portfolio.  Those darn greedy Wall Streeters and politicos ruined it for mainstream Main Street folks like me. 
Bargaining: If only this market would settle down, I promise not to speculate on securities I don’t understand ever again.  Yes, I said that after the dot.com meltdown, but I really mean it this time. 
Depression: I can’t quit staring at my recent brokerage statement and it just makes me sick.  I can’t work.  I can’t eat.  I can’t even participate in my weekly golf game or poker outing.  Should I liquidate everything?
Acceptance: OK, it happened and there is nothing we can do about it.  No use crying over spilt milk.  Moving forward, is my portfolio allocated in the most appropriate manner for me and my family? 

And, hey, maybe there a few good bargains out there amid the market carnage?

Sometimes one just has to laugh to keep from crying.  Virtually all investors, no matter how big or small, have suffered considerable losses over the past months. (Yes, even your colleague who claims he timed the top perfectly and is waiting to nail the exact moment to reinvest.)

Now it is Time for Patience and Confidence

There are plenty of actors whose widespread greed contributed to the current predicament.  Individuals from all walks of life and institutions of all sizes lost sight of common sense, in pursuit of the almighty buck.  Mortgage lenders and real estate speculators; bankers and advisors; investors and borrowers who bought beyond their means.  Their specific rationales may have been different, but their motivations were ultimately quite similar.  Now feelings of regret, concern, uncertainty, and panic have set in along with the five stages of grief, not to mention more than a little finger-pointing. 

The advisor today must engage in more hand-holding than normal and ramp up communication and education to help clients understand the complexities of the current government efforts to staunch the crisis.  They must exercise a great deal of patience that will hopefully pay off in confidence in the days, weeks, months, and even years ahead. 

Patience:  To counteract fear and panic, advisors need to help investors attempt to remove emotion from the equation and not make rash trading decisions that they may soon regret.  They should realize that central banks are working together to tackle the giant economic and financial mess,. These stimulus moves will not solve every problem overnight, but over time, the global economy and markets will be primed to rebound.  A few simple steps will help allay fears:

• Together, advisors and investors should review their asset allocations to make sure their portfolios are structured in the most appropriate manner. They should also make sure their cash positions are sufficient for the challenging times that may be ahead. 
• A few simple budgetary adjustments also may be in order, but investors must have the common sense and patience to know that they cannot reliably time the markets. 
• When possible, avoid touching those investments earmarked for five plus years in the future.  Once they are sold, the losses may not ever be recouped. 

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