When Panic Sets in, How One Financial Adviser Talks Clients Off the Ledge

Coronavirus panic is real, and it extends beyond health concerns to people's financial lives. But drastic measures can be disastrous.

For the majority of the American population the coronavirus pandemic rates as one of the most frightening times of their lives. We are fighting an invisible enemy. There is no vaccine or cure, and regardless of how cautious you may be, you can still get really sick and die. No wonder many of us are traumatized. We have lost control of our lives and well-being.

In addition to the physical threat, the social and financial ramifications are far-reaching. Things we all took for granted are now taboo – shaking hands, hugging a friend, and grabbing a coffee hardly scratch the surface. Socially, we’ll be fine. A nod may replace a handshake for the foreseeable future. The financial ramifications are much more serious.

Many people are hanging on by a thread. People have been furloughed or fired. If they lived paycheck to paycheck, they are in financial trouble.

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Financial guidance when it is most needed

Fortunately, most of my clients are not in danger of losing their homes, or going to bed hungry. They are still worried, though, especially if they are in or near retirement. They worked hard for their money and don’t like to see their portfolios go down. I understand that because I also work hard for my money and don’t like to see my portfolio go down either.

Many of my clients were with our firm in 2008, so we have a history together. They can call me after-hours or on weekends, if need be. The market has had a great run the last several years, and those who stayed invested and bought quality investments have done well.

I understand the desire to preserve what you have. That being said, if you are working with a financial professional, call or email them if they haven’t already called you. Just because their office may be closed does not mean the stock market is. These days watching the market is like watching a yo-yo. It bounces up on good news and goes down on bad. Generally, the news is health-related — unlike in 2008, which was truly a financial crisis. Our current situation started as a health crisis, which has also become a financial crisis. Painful as it is, hopefully, as a nation, we will survive stronger.

We are going through a crisis unlike any other time in our lives. The Greatest Generation experienced World War II, but not a widespread pandemic like this. For the other generations (boomers, Gen X-ers and millennials), they haven’t experienced anything nearly as scary as this tragic time. That is why it is easy to panic.

What I tell my clients

As scary as this is, if we remain healthy by taking precautions and social distancing, this pandemic will run its course. We were riding high and the economy seemed to be unstoppable, but we always knew a recession was going to take place at some point. We have been in the longest bull market in history. No one expected a pandemic to be the straw that broke the camel’s back.

If you are a person with a long-enough time horizon, riding out the storm is most likely the right thing to do. Older clients usually have a larger amount of cash reserves and generally more conservative investments. The shorter your investment time horizon, the more liquid you should be.

When clients frantically call and tell me to sell, I explain that right now they only have a “paper loss.” In other words, when the market stabilizes and ultimately rebounds, that loss will be erased. However, if they sell when the market is down, the paper loss becomes a real loss. A well-thought-out investment liquidation strategy may make sense and is generally already in place for those who need an income stream. A panic knee-jerk reaction rarely makes sense.

Helping those who insist on selling

Almost every financial planner probably has one client who calls and demands to sell everything. As a Certified Financial Planner and Certified Financial Transitionist with many years of experience, I can refocus most people. But if someone calls and is insistent on liquidating their entire portfolio, there is one last-ditch effort I use to talk them “off the ledge.”

I very politely ask, “If you feel so strongly about going against my advice, can you please put in writing what you would like me to do on your behalf? I want to make sure I have proper documentation that this is your own decision to sell.”

Believe it or not, most never provide written instructions after that conversation. Maybe they needed a sounding board to vent their fears and frustrations, which are very real.

The psychology of investing

Time and again, the industry has seen that those who invest with their emotions, and not their heads, can make catastrophic mistakes with their retirement portfolios. Our profession has created a term called “behavioral finance,” which shows how what we think as humans can influence our financial decisions, sometimes leading us to have the wrong behaviors at the worst possible times.

If you need help getting talked off the ledge, reach out to a financial planner. That way you have someone to help protect yourself from yourself in times like these.

Please be rational and do not panic. Most importantly, stay safe and healthy!


Securities and Advisory Services offered through Cadaret, Grant & Co., Inc., a Registered Investment Adviser and Member FINRA/SIPC. HMS Financial Group and Cadaret, Grant & Co., Inc. are separate entities.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Barbara Shapiro, CFP®, CDFA®, CeFT
President, HMS Financial Group

Barbara Shapiro is the President of HMS Financial Group located in Dedham, Mass. She is a CFP®, Certified Divorce Financial Analyst and a Financial Transitionist®. She is also co-author of "He Said: She Said: A Practical Guide to Finance and Money During Divorce." Her firm specializes in comprehensive financial planning with a subspecialty in divorce that assists clients' transition from marriage to independence with peace of mind and confidence. Learn more at HMS-Financial.com.