When adversity comes, how do you respond? Are you a carrot, an egg or a coffee bean?
In his April column, Publisher Rich Santos pointed out that the number of arbitration cases at the NASD is up 19% since January.
The anecdotal evidence I've gathered from National Association of Investment Professionals (NAIP) members and readers of my column confirms this. Many are going through some very tough times right now. Some have never experienced a bear market. And those who experienced the 1973-'74 bear market say this one is far worse.
How are you handling the adversity? Perhaps the following story will give you some guidance.
A daughter complained about the problems in her life to her father. It seemed that as one difficulty was solved a new one arose. She did not know how she was going to make it through the trying times.
To offer his support and insight, her father took her to the kitchen. He filled three pots with water and placed each on a hot burner. Soon the water boiled. In one he placed carrots, in another he put eggs and in the last he added ground coffee beans. After boiling for about 20 minutes, he placed the items in separate bowls. He asked his daughter, “What do you see?”
“Carrots, eggs and coffee,” she replied.
He asked her to feel the carrots. She noted they were soft. Then he asked her to break the eggs. She couldn't since they were now hardboiled. Finally, he asked her to sip the coffee. She tasted its rich flavor.
She asked, “What does it mean, Father?”
He explained that each food had faced the same adversity — boiling water — but each reacted differently. The carrot went in hard, but became soft and weak. The eggs had been fragile — their thin outer shells protecting liquid interiors — but after sitting in boiling water, their insides became hard. The coffee beans were unique. They changed the water.
“Which are you?” he asked his daughter. “When adversity comes, how do you respond? Are you a carrot, an egg or a coffee bean?”
How about you? Are you the carrot that seems hard, but with adversity loses strength? Are you the egg? Are you a fluid spirit that becomes hardened after a difficult time? Or are you like the coffee bean? When the water gets hot, your best features come out.
How can we apply this tale to the predicaments we face because of the down market? Here are a few recommendations:
Use this time to trim the deadweight from your book. Get rid of clients who offer few rewards. Also, explore new ways to educate yourself and become better at what you do. Look for opportunities to grow your business.
Go bargain and client hunting. For advisers who have never been through a bear market, this is a great time to identify discounted stocks for your clients to hold long term. This is also the best time to aggressively go after clients who are unhappy with their current adviser.
Stay flexible. Keep your ears, eyes and most importantly, your mind open for ideas to adopt before others do. And be open to employment opportunities. Look for companies that offer not just the best technology and creative marketing, but also focus on treating customers and employees ethically.
T. Sheridan O'Keefe is a registered rep based in Minneapolis, and president of the National Association of Investment Professionals, a trade group for brokers and advisers. The NAIP can be reached at 952/322-6247. He can be contacted at [email protected].