Bill McMahon was on the 69th floor of 2 World Trade Center — the South Tower — when the first plane hit the North Tower at 8:46 a.m. on Sept. 11, 2001.
A regional director in Morgan Stanley's Global Wealth Management division, Mr. McMahon was one of about 4,700 Morgan Stanley employees in the Trade Center complex that day. He and his division's 250 or so employees were making their way down to street level when they felt the building shake as the second plane hit the South Tower.
They were four blocks away at Trinity Church when the building collapsed.
“I remember the huge cloud of smoke,” he recalled.
It has been a decade, but those who lived through the attacks in New York and Washington often find it difficult to talk about their experiences, much less convey their feelings about it.
“We live in the same neighborhood as we did back then and nine people from our parish died,” said Mr. McMahon, a resident of Basking Ridge, N.J., who led the wealth management division's New York region 10 years ago and now is the director of the Midwest/Southern Division. “Whenever I see any of the widows in our town, it brings it all back to me.”
The events of Sept. 11, 2001, changed everything for the families of the nearly 3,000 victims of the attacks. And in ways large and small, personal and professional, the experience changed how all Americans live and work.
Tom Bradley, now president of TD Ameritrade Institutional, used to get up at 4:30 a.m. to work out at a gym before going into the office. He doesn't anymore.
“I want to see my kids before I go to work now,” Mr. Bradley said.
“It was so shocking to see the damage being done to buildings that [had] housed our employees,” said Tom James, executive chairman of St. Petersburg, Fla.-based Raymond James Financial Inc., who watched the tragedy unfold on television.
Shortly before the attacks, his company moved most of its New York employees to offices in Midtown.
“We just didn't think that that kind of thing could happen to us,” Mr. James said.
Now, 10 years removed from that day, industry leaders agree that the deep sense of vulnerability engendered by the attacks has profoundly changed financial markets and the advisory business.
“I think 9/11 was a turning point in our country, in the lives of Americans and in our industry,” said Larry Roth, chief executive of Advisor Group.
“People were angry and shocked and scared, and those sentiments were obvious in the market. While I think we've always known this, it became evident that the financial markets were not immune to tragedy or fear, and it's a lesson we continue to see resonate today,” Mr. Roth said.
“I'm not sure we ever really recovered from the shock of 9/11,” said Alexandra Lebenthal, chief executive of Lebenthal & Co. and wealth management firm Alexandra & James. “It was the end of our innocence, to some extent.”
One immediate concern for leaders in the financial services industry at the time was to protect their businesses. With the tragic examples of financial firms such as Cantor Fitzgerald LP and Sandler O'Neill + Partners LP, which lost so many people and so many resources, business leaders responded quickly, investing in backup systems to make sure that their firms couldn't be disabled again by a similar event.
“The attacks really brought the business continuity issue to the fore,” said Ms. Lebenthal, who was in the process of selling a predecessor firm to Advest Group Inc. at the time of the attacks.
Her offices were within a block of the World Trade Center, and she and her employees were unable to get into them for several weeks.
Jim Weddle, managing partner of Edward Jones, is of like mind, noting that his firm has invested in redundant systems in Arizona to ensure that the business can function if something happens to its headquarters in St. Louis.
And like many other firms, Edward Jones now routinely takes precautionary steps like having its executives fly in different planes to and from meetings.
Beyond logistical issues that 9/11 posed for business leaders, the attacks and the volatility they spawned in global markets caused a major change in investor sentiment. Although industry leaders are wary of drawing too many conclusions about how 9/11 changed the way Americans think about their money and manage their finances, all agree that it reshaped the investment industry over the past decade
At the time of the attacks, investors were reeling from the bursting of the dot-com bubble and the crashing of technology stocks that began in early 2000. With the Federal Reserve hiking interest rates six times between 1999 and 2000, the economy was in recession.
“After 9/11, we saw a significant shift in investor behavior, and it wasn't a slow shift. It was a rapid change that to a large extent is still in place,” said Patrick O'Connell, senior vice president at Ameriprise Financial Inc., who was running an office for the firm in Delaware at the time.
The first sign of such changes came on Sept. 17, 2001, when the New York Stock Exchange resumed operations. That day, the Dow Jones Industrial Average lost 684 points, or 7.1%— the single biggest point drop for the index until that time.
By the end of the week, the index was lower by 1,370 points, or about 14.3%, representing a $1.2 trillion loss in market capitalization.
The market, of course, recovered and nearly doubled between the end of 2002 and 2008, when the financial crisis began to unfold. But the market ups and downs were characterized by unusual volatility and uncertainty, which has changed how Americans invest their money and what they expect from their financial advisers.
ALL ABOUT RISK
“People focused on their families and their loved ones as financial markets reacted with great volatility,” Mr. Roth said. “They realized the need for and the increased value, of protection, guarantees and assistance.”
And they looked to advisers for that assistance.
“During the Internet bubble, people thought they could throw darts at a newspaper and do better than a financial adviser,” Mr. Bradley said. “But after they got hurt, investors gained a new appreciation of the value of an independent trusted adviser.”
For those advisers who made their living recommending a handful of stocks to clients, the new landscape was a major challenge.
“The number of clients engaged in financial planning is way up in the last 10 years, and we've seen a lot more interest from investors to engage in comprehensive, holistic relationships with their financial advisers,” Mr. McConnell said.
The explosive growth of the fee-based investment advisory business is a testament to this surging demand for financial planning services rather than just investment selection. In large part, it has been a reaction to market volatility and investors' desire to preserve capital as much as to accumulate it.
“The 2001-02 period caused people to realize that there was no panacea, that they couldn't just buy technology stocks and get 30% returns forever,” Mr. James said. “Maybe the market from 1982 to 1999 was the real anomaly, not this market now.”
The new mindset has taken investors into new asset classes and markets, and pushed advisers to search for investment alternatives to better diversify clients' portfolios.
“The last decade has made advisers better,” Mr. McMahon said. “They are better asset allocators and better diversifiers of portfolios.”
The legacy of 9/11 for investors and advisers is that risk is now as much of a concern as return. And brokers and advisers are now valued as highly for their ability to manage the former as they are for being able to produce the latter.
“Clients now place a lot more value on discussions about risk,” Mr. Weddle said. “Financial advisers better have that discussion or their clients will go elsewhere.”
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