As an advisor, many of you identify with society’s collective fear of COVID-19. At the same time, you are working to allay your client’s fear of significant market loss. You are likely experiencing life-changing events on two fronts, which undoubtedly, is stressful far beyond any other period in your wealth management career. Many things are out of your control, the future of our economy and your own health is unknown. Unknowns create anxiety for everyone, and especially for you as an advisor, who is used to ‘advising and fixing’ everyone’s financial problems. There is a lot of psychology involved working with clients, not just rebalancing and trading portfolios.
When uncertainty exists, making strategically sound decisions requires a well-planned approach. A financial plan is your written work that outlines the steps to create a positive outcome for your client. Within the recommendations, you balance a client’s portfolio after determining the uncertainty of meeting their financial goals if left unbalanced. You excel in creating a strategy for your clients, and perhaps a similar approach is needed for your own life, especially during these times of great uncertainty.
According to a McKinsey article titled, “Strategy Under Uncertainty,”four levels of uncertainty exist in business, which can apply to personal life. How quickly the levels are identified and analyzed determines how quickly the unknown can be dealt with:
Level 1: A clear future through a singular but linear view our
Level 2: An alternative future where the future depends on a few scenarios that may come into play.
Level 3: A range of futures due to several apparent variables, but the actual outcome is still unknown.
Level 4: True ambiguity exists where it is impossible to identify the scenarios leading up to the event that will define the future outcome.
Level 4 is where we are at today. However, we do know that the economy and the markets will recover but as to how fast and to what degree is still unknown. There is no way to plan for a Level 4 event, no matter how hard we try. Today we can think about our lives and our careers reflect on what is working and what is not. Additionally, we can plan for our future based on possible scenarios that exist today or possibly exist in the future. We can do this at a business level, but more importantly at a personal level.
This is perspective in its purest form-learning from our experiences, trying to foresee variables that will impact our life’s outcomes and planning for our futures. If we’ve learned anything from COVID-19, it’s that rebalancing our lives may be just what we need.