Institutional memory gives experienced advisors an edge in volatile markets. This is what gets lost without it

As equity valuations remain historically elevated — with the Cyclically Adjusted Price-to-Earnings (CAPE) ratio hovering just above 39, the second-highest level in more than 150 years, according to Kitces.com — experienced financial advisors say the single biggest advantage they hold over their younger peers has nothing to do with spreadsheets: it is the pattern recognition that only comes from living through multiple market cycles.

Firms call it institutional memory — the accumulated understanding of how markets have behaved during crises such as the dot-com collapse of 2000, the mortgage-driven financial crisis of 2008, and the pandemic-era selloff of 2020. 

"History doesn't repeat itself, but it often rhymes," said Nate Garrison, senior vice president and chief investment officer at World Investment Advisors, in a recent conversation with InvestmentNews. "Recognizing those patterns is one of the most valuable skills in investing. More experienced advisors have simply lived through more of those market cycles and have seen more of the patterns."

Garrison is careful to distinguish between experience and prediction. Seasoned advisors, in his view, are not necessarily better at forecasting the timing, direction, or magnitude of market moves. Their advantage, he argues, is temperamental.

"They may not be any better at predicting the exact timing, direction, or magnitude of market moves, but many of them tend to react less emotionally to both market hype and despair. And in my experience, it's overly emotional reactions — and not the markets themselves — that tend to do the most damage to portfolios," Garrison said.

That observation tracks with research from DALBAR, whose 2024 Quantitative Analysis of Investor Behavior report found that the average equity investor underperformed the S&P 500 by 5.5 percentage points in 2023 alone — a gap attributed primarily to emotionally driven decisions such as selling during downturns and missing subsequent rebounds. The data, cited by Human Investing, reinforces what veteran advisors have long observed in client behavior: the market is rarely the client's worst enemy.

The danger of the "hot market" trap

Kathleen Adams, a financial advisor at Sagient, frames the challenge facing younger advisors less as an analytical gap and more as a perspective problem. For someone who has never witnessed a severe correction in an overpriced market, the pull of a surging sector — driven by mass enthusiasm rather than fundamentals — can be difficult to resist. And if the advisor has not experienced it either, the risk compounds.

"A younger advisor may be equally unable to incorporate past realities of market extremes and may succumb to the desire of their client to join in on the excitement and enthusiasm of the crowd," Adams said. "If the client is lucky, the advisor might provide advice about allocating a very small amount of their portfolio for what can be the fun of such speculation."

Adams argues that "perspective matters" but "planning matters more." Those who understand the cyclical nature of markets are better positioned to anchor clients to long-term goals rather than short-term momentum — a discipline that becomes especially important when price-to-earnings ratios diverge sharply from underlying business fundamentals, as they did during the dot-com era and, to a degree, during the AI-driven technology rally of recent years.

Rebalancing early — and often

Glen Goland, a wealth manager with Coldstream Wealth Management, offers a more operational lesson from his years working alongside veteran advisors. The most experienced professionals, he says, were consistently quicker to rebalance when markets grew choppy — a discipline he once questioned but has since embraced after guiding clients through multiple significant corrections.

"I now understand why, as advising clients through several material corrections has taught me that successful planning across generations is more about avoiding the big loss than it is capturing every last dollar on the upside," Goland said.

Morningstar's behavioral insights team reached a similar conclusion in research published in November 2025, finding that clients were more comfortable enduring volatility when given historical context and long-term data — and that market education, not market prediction, was the support clients most wanted from advisors during the tariff-driven uncertainty of last year.

How to close the experience gap

The wealth management industry is facing what J.D. Power's 2025 U.S. Financial Advisor Satisfaction Study described as a generational shift — with nearly half of all advisors within 10 years of retirement — preserving and transmitting that knowledge is becoming a pressing priority.

For Garrison of World Investment Advisors, the solution for younger market participants is direct: "Read frequently, read deeply, and read broadly." Centuries of market history are documented in accessible form, capturing the decisions — successful and otherwise — of investors across every type of cycle. That body of work, he argues, can accelerate the pattern recognition that normally takes decades to develop.

Goland takes a different angle, noting that younger investors tend to consume news in shorter, faster formats than their predecessors. Firms, he suggests, should adapt accordingly — breaking down historic market events into digestible short-form content and offering clients AI-assisted prompts that help frame current events against historical precedents.

"Firms ought to consider breaking down these historic negative events into a series of short, digestible media posts," Goland said. "They could also offer younger investors appropriate prompts to ask AI that would help frame today's events with the past, with the prompts providing some direction as to which data ought to be used in the analysis."

For the industry as a whole, the message from these three advisors is consistent: institutional memory is not a soft skill to be celebrated in retirement speeches. It is an active, transferable asset — one the profession can ill afford to lose as the generational clock runs down.