“Nobody rings a bell at the top, or bottom”
A long time ago, in a galaxy far away from my old Morgan Stanley days, I met one of the biggest influences on my advisory practice today. He gave me almost all the building blocks for understanding a client more deeply with literally disks (back when we used CD-ROMs) full of spreadsheets, protocol, and touch pieces on making his vision a reality. One of his best pieces was his client questionnaire.
The questionnaire was long… and in some ways overly basic. He had questions like:
“You do understand I cannot give legal and tax advice?”, “Do you have a will and/or Trust?” and “Do you understand what discretionary authority is?” and would ask a client to explain, among other things. The point of all of this was a systematic way to educate and document all of these answers, to make sure everything went as expected… and to protect you, the adviser, if they didn’t.
You’d probably expect all of this from any adviser worth their salt… but I’ll tell you there was one incredibly simple tool that he used religiously, and I still use today that has been wholly invaluable to me and my practice… and, I think, to my clients…
It’s The Clock:
“I want you to tell me where you think we are in the market cycle right now… If 12 o’clock is the top, and 6 is the bottom. Where do you think we are in the market right now?”
In this day and age, where almost everything we do is systemized and backed by algorithms and almost automatic… I think sometimes we lose sight of the emotional elements of greed and fear and how they affect one’s psyche, and even with the fantastic tools we use, like Riskalyze, none of these tools really address finding this place in a client’s mind. The Clock, as simple as it is, offers this kind of insight. The clock helps me understand things like, if the investor thinks we can time the market (and what they expect that timing to offer), how bullish or bearish they are (with regard to any market), and where we need to spend time drilling down into facts as their adviser and what we need to do to educate them based on the opinions they’re holding and the mental math they’re using. The point isn’t for anyone to know… there’s no bell; it’s to frame ones understanding.
Maybe the clock will help you as an investor, to help you quantify your emotions and mental math. Maybe it will help you as an advisor, to get on the same page as your investors.
So ask yourself, “Where do you think we are in the cycle?”