Most advisers suffering from PTSD following 2008 crisis: Paper

Switch to tactical strategies from buy-and-hold could be psychological remnant

By Christina Nelson

May 10, 2013 @ 2:09 pm (Updated 6:47 pm) EST

adviser, buy-and-hold, tactical, investment strategy

If you were a financial adviser in 2008, odds are, you experienced post-traumatic stress following the market collapse and succeeding crisis.

According to a paper by Bradley Klontz and Sonya Britt of Kansas State University, 93% of the 56 planners they surveyed bore psychological symptoms consistent with medium to high levels of post-traumatic stress, and 39% experienced severe stress on the level of post-traumatic stress disorder. (Read the findings below)

The authors explain that advisers assume tremendous financial and emotional responsibility in managing client assets, and although side-effects such as sleep troubles, anxiety and concentration problems have ebbed since those first few harrowing months after the crisis, others, such as questioning the most basic assumptions about how to help clients reach their financial goals, have persisted.

Almost half the planners (47%) surveyed in February and March 2009 agreed or strongly agreed that the “financial crisis has caused me to question what I thought I believed about how to help people create the life they want.” And 42% agreed or strongly agreed that the “economic situation represents a fundamental change in the rules that have governed the products and services I have provided my clients.”

The paper, “Financial Trauma: Why the Abandonment of Buy-and-Hold in Favor of Tactical Asset Management May Be a Symptom of Posttraumatic Stress,” points to data from financial services industry writer and commentator Bob Veres showing that 83% of advisers are practicing some form of tactical management post-crisis, a significant shift from a pre-crisis focus on more-conservative buy-and-hold strategies. They conclude that although acute distress may have abated in recent years, cognitive changes linger — potentially compromising the health of client portfolios going forward.

“Planners might benefit from exploring what, if any, psychological remnants from the 2008 financial crisis may be influencing their portfolio decisions today,” the paper states. “In an effort to avoid future financial trauma … the increase in tactical management based on the myriad conflicting economic predictions will inevitably create more.”

Financial Trauma: Ditching buy-and-hold could indicate PTSD among financial planners

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