By ADRIAN LOWCOCK 24/04/2008
The immediate fallout of the credit crunch for me is a challenge in terms of understanding the situation as it unfolds and being able to transmit that information clearly to my clients. News headlines like the Northern Rock collapse naturally draw people’s attention to their finances - and my workload rises as a result. The whole team here has definitely been busier as we’ve dealt with the increase in enquiries. Clients are more concerned for obvious reasons, so I’m spending more of my time explaining to clients what the best approach is and how they can potentially prosper in the current market. Each call takes longer and you need to be prepared to explain the same situation to different clients, above all ensuring they understand the risks they are taking with investments. Dealing with worried or concerned clients adds significantly to the stress of my job - after all I’m here to help my clients achieve their financial goals in life and make their money work harder for them.
The credit crunch has definitely introduced more uncertainty. I am now frequently asked things like ‘Will the market fall further’. ‘Should I stay invested?’. ‘What does the future hold?’. But there are no simple answers, and every client is different – which is frustrating for clients and professional advisers alike. In my experience, investors have short memories, but it has been less than ten years since a crisis has hit the UK investor. The ‘Dot Com Bubble’ was supposed to be a rare event. Investors fled the Technology, Media and Telecommunications sectors as values collapsed. Yet we survived relatively unscathed by it all, with property prices coming to the rescue and supporting consumer confidence.
Our brand and reputation means that more clients are coming to Bestinvest for advice on what to do with their existing portfolios. Indeed, many investors come for advice only when the markets are more difficult because it is easy to make money when everything is going up.
Having experienced difficult investment environments in the past, there are some simple rules I recommend to follow:
- Follow the advice Douglas Adams very wisely gave and ‘DON’T PANIC’. – The number of conversations I have had recently where a client has rushed in and sold their investments the day the markets have fallen only to regret it the next week when the markets have recovered.
- Diversification – This is the mantra by which professionals and investors should live by. Using asset allocation models help remove emotional input into decision making and will encourage disciplines like sell high & buy low.
- Review your personal situation – I now spend much more of my time helping clients understand risk and what it means to them. Once they understand it, they can then determine what strategy to adopt.
- Invest for the Long Term – If recent investments have fallen - remember the timescale you are investing for. Most investments are not for the short term.
- Get good advice - Seek professional investment advice, this may be invaluable.