Proactive advisors less stressed by rocky markets

The partial recovery of financial markets last year appeared to lighten the stress levels of financial advisors, according to the 2009 Advisor Survey, sponsored by Lévis, Que.-based Desjardins Financial Security in partnership with Investment Executive.

Out of 929 advisors surveyed, 85% reported their stress level in December 2009 was the same or lower than in December of 2008, while 15% said they were under greater stress last year than in 2008. Of the latter group, 54% experienced anxiety or a lack or loss of sleep.

Thirty-four per cent of respondents cited the market’s plunge as the major cause of stress, anxiety or depression in the workplace; 16% mentioned concern about their clients’ emotions and well-being. Other sources of stress were industry compliance issues (10% of respondents); the impact of the economic situation on sales income (10%); conflicts with clients (10%); and pressure to reach quotas (9%).

Because the stock market had bounced back during the time in which the study was conducted, many advisors felt more at ease. Says Dan Richards, president of Toronto-based Clientinsights: “Every advisor is less stressed today than a year ago because, a year ago, everybody thought the world was coming to an end.”

As well, many advisors surveyed felt more relaxed because of a renewed confidence in their ability to direct clients through a difficult time, says George Hartman, president and CEO of Toronto-based Market Logics Inc.: “If advisors took a proactive stance during the crisis, such as increasing communications with their clients, then they would be more confident about their client-relations abilities compared with when the crisis began.”

Those who were proactive accepted the market mayhem and conducted their practices as they had before the downturn began, Hartman adds: “There was an acceptance of what the crisis was and that life needs to go on.” This enabled advisors to pursue client contact, no matter how bad the markets got. Hartman calls this a shift from a “Gee, ain’t it awful?” mentality to “I did the best I could.”

However, stress levels had increased for advisors who couldn’t make that mental shift because they got trapped into fixating on the negative market conditions. To cope, they adopted a passive strategy of hiding from their clients, says Hartman. Of the 59% of advi-sors who were more stressed and changed their work habits to cope, they majority did so by becoming more passive. For example, 26% of them said they saw clients less frequently and 16% took more days off. Only 19% said they were working harder, and a mere 8% increased communications with clients.

Julie Littlechild, president of Advisor Impact Inc. of Toronto, suggests that stressed-out advi-sors probably have a superficial sense of their worth — in much the same way that some people link their self-esteem to their body weight.

“They link their value to how client portfolios perform,” Littlechild says, “as opposed to aspects of the business within their control, such as educating and responding to client concerns. They felt responsible for the [economic] mess.”

And they felt badly about being unable to stop it. These advisors were unable to communicate their value to clients beyond that market performance.

On the flip side, advisors who took a more proactive stance with their clients were confident that clients understood the value the advisors offered beyond the performance figures racked up by clients’ portfolios, says Littlechild. As a result, these advisors were likely to experience less stress.

“These were advisors who could step back, understand the market wasn’t them and could then create a plan for dealing with the situation,” Littlechild adds. “They responded to the market rather than feeling responsible for it.”

How advisors respond to market conditions — whether they fall into the proactive or passive camp — and, thus, the level of stress they experience boils down to how they approach problem-solving, says Joanne Ferguson, a partner with Toronto-based Advisor Pathways Inc. According to a psychological profiling tool produced by Kolbe Corp. of Phoenix, Ariz., some advisors can be classified as following a “fact-finding” approach to decision-making; others may follow a “quick-start” approach.

“Fact-finding” orientation refers to solving a problem by gathering as much information as possible; “quick-start” orientation refers to those who act immediately when there is a problem. They feel comfortable making the best decision they can based on the data they have, even though they may not have all the historical information needed to be sure of their solution.

@page_break@Advisors with a dominant fact-finding approach may have found themselves overwhelmed by the crisis, Ferguson says: “There was no history for them to draw on with the downturn because it had not been seen before.”

That made it difficult for those advisors to respond to the situation immediately and effectively. Stress developed from having not enough information to draw on when confronting clients. The passivity then came from thinking “What’s the point?” of getting on the phone with clients without the “right” facts.

Meanwhile, advisors with a dominant quick-start orientation tend to be energized by challenges. They thrive on being kept on their toes when dealing with clients in a turbulent market, says Ferguson: “Once the [financial] crisis hit, they got a charge out of being able to reach out to clients and deal with the unknown. Their stress was then lowered and they were able to handle the situation very differently.”

It is important for advisors to recognize their decision-making approach, says Ferguson. This enables them to alter their strategy in a way that lessens stress and improves performance with clients.

It’s also crucial for advisors to recognize the intensity of the stress that they are experiencing, which may not be as easy as it sounds. “Stress is sneaky; it hides or it comes out physically,” Ferguson says. “Some advisors don’t realize the toll it’s taking until the stressor is gone.”

She thinks advisors should step back from business in order to assess the situation: “Sometimes, I ask advisors when was the last time that they set aside time for themselves.”

This means even going beyond scheduled hobbies such as working out in the gym or spending time with the family. Without a meditative period, she says, advi-sors might not be in tune with how stressed they really are.

Meanwhile, Littlechild points out, advisors who were selfish in how they handled stress will continue to perform effectively. “If they did what was right in terms of sleeping, eating and taking care of themselves,” she says, “they probably fared much better in the crisis than those who didn’t.”