Industry rising: Get ready to soar again
By Steven McCarty
The National Ethics Association
According to classical mythology, the phoenix was a bird with beautiful gold and red tail feathers. Near the end of its 600- to 800-year lifespan, it built a nest of cinnamon twigs, then set the twigs on fire, reducing itself and its nest to ashes. But soon it began a new cycle of life, death and rebirth.
In musing about recent events, I've been struck by the parallels between the phoenix myth and our own industry's history. Our business built a sweet nest with trillions of dollars of assets. The nest generated wealth for its leaders, a livelihood for its financial advisors, and great value for its clients. But greed, incompetence, and lack of oversight ignited a fire, transforming sweet success into bitter ashes.
Now, the mythical phoenix never questioned its fate. Each time it died, it rose again without rancor or doubt. But the same can't be said of those who work in financial services. Many are haunted by visions of that burning nest, and rather than preparing to rise again, they remain earthbound. And some clients may be grounded as well, paralyzed by fear and mistrust.
To all of those advisors and clients I say, "Have faith. The phoenix will rise again." That's because government has injected financial resources, regulatory and governance practices will be overhauled, and financial advisors are working hard to rebuild their clients' confidence -- as well as their own.
We're already seeing it happen: As the equity markets melted down last fall, advisors didn't let it get to them. They soared to meet their clients' needs. According to the Rydex Confidence Index, slightly more than 83 percent of advisors said they called their clients to discuss the market decline, and 66 percent said they sent e-mails to their clients with the same objective. Slightly less than 45 percent said they met with their clients face-to-face. In short, advisors confronted the flames fearlessly, helping the phoenix emerge once more.
So what can you do to accelerate the industry's rebirth? Here are three suggestions:
1. Recommit to ethical sales practices. People have lost faith in our industry. The last thing they need or want are more misleading or deceptive claims or products of dubious value. If you do business with the utmost integrity, you will do your part to rebuild the public's confidence in our industry.
2. Rethink your position on leverage. Now's the time to help your clients manage their money responsibly -- and to practice what you preach in your own financial affairs. If the recent crisis taught us anything, it's that we need to find a new balance between buying and saving and the proper use of debt.
3. Redouble your commitment to client service. This involves the basics of fact-finding before recommending a product, conducting annual reviews, and returning phone calls promptly.
Even if you do these and other things, the process of rebirth won't be easy, but I promise you it will happen. Look within yourself and you'll see the rising, even as we speak.