Easy.  Tell them earnings always go up, therefore stock prices always go up.

If he doesn't buy that ask him if he doesn't grasp the concept that if he withdraws his money he will be taking money from your pocket and that is unacceptable.

Tell him there is no thrill to owninig CDs.

Tell him that retiring with your nest egg in tact is not all that it's cranked up to be.

Finally mock him.  Start making chicken sounds and ask how long he's been a coward.

And when he comes to the bank with his check… Hello

[quote=munytalks]

Remember all the hand-holding we all did during 2001 and 2002?

Remember all the analogies about timing and the market?

Inflation and investing?

I got a very strange call today. A client said he thinks the market just 'isn't going to get any higher' and wanted to liquidate everything. He plans to take it all to his Credit Union to buy CD's- but not long term ones because he's not sure he wants to tie his money up for longer than a year.... he's 58.

I was very good at hand-holding during 2001 and 2002. When the market turned and my clients were making money again, things got easier. People like to make money.

I would like to hear from other advisors out there on how you manage clients' fears when things are going well.

[/quote]

Cut him loose. He doesn't belong in the market. Lots of people who are in the market don't belong there. If you had sold him a variable annuity, he wouldn't be freaking out.

amen brother. i mean about the annuity.

[quote=ezmoney]amen brother. i mean about the annuity.[/quote]

There's just something about that peace of mind that my clients like to have. I never have to take calls from any whiners.

I would recommend approaching this situation as an "advisor".

First, assure the client that as their advisor, your primary job is to present them with all the facts about the possible implications of withdrawing from the market. An advisor would acknowledge that the client could be right and that the market could be topping-out, but your job is to consider 100+ years of market behavior versus "what-if's".

Assuming there are no other reasons for withdrawing from the market, like an unmentioned large debt obligation, job termination, etc.; an advisor would caution the client against making any rash financial decisions and present evidence that supports maintaining a position in the market.

If the client is still bearish, the next step would be to compromise and suggest moving only a portion of the portfolio to cash equivalents, while still maintaining some exposure to equities (preferably value-oriented equites). This way, the client hedges their bet either way the market might move. 

If the client still doesn't agree to stay invested in equities, be prepared to present some alternative investments; even CD's. As you well know, it's important not to let the assets leave, even if they're only in a money market account. (Make sure the credit union offers deposit insurance, some don't!) The client might even be a candidate for a variable annuity.

Whatever the outcome, the client should know that you're a source of reliable, unbiased investment information. That, although you can't predict the market, with your expertise, you can present enough information so that both of you can come to a reasonable, well thought-out decision on how to allocate their investment.

Just sayin'...

"A client said he thinks the market just 'isn't going to get any higher' and wanted to liquidate everything. "

What is his basis for saying this. Yes, the Dow is at an all time high. How many other all time highs did it need to surpass in order to get here? About 12000. Where would he be if he bailed and went to CDs at 1000, 2000, 5000 or 10k?

[quote=Pants]

"A client said he thinks the market just 'isn't going to get any higher' and wanted to liquidate everything. "

What is his basis for saying this. Yes, the Dow is at an all time high. How many other all time highs did it need to surpass in order to get here? About 12000. Where would he be if he bailed and went to CDs at 1000, 2000, 5000 or 10k?

[/quote]

That's true.  It's impossible for the market to go down.  Earnings always go up so prices will always go up too.

In order to retire rich all you have to do is buy and never sell.

Life is too short to work with stupid clients. Cut him lose and find someone

that isn’t such an idiot.

[quote=Reggin]Life is too short to work with stupid clients. Cut him lose and find someone
that isn't such an idiot.[/quote]

Amen. Also, if you have idiots for clients, you're an idiot. Our books are a reflection of who WE are.

[quote=Reggin]Life is too short to work with stupid clients. Cut him lose and find someone

that isn’t such an idiot.[/quote]

Actually, the client is just the opposite from most “idiots.”   Markets are controlled by fear and greed, but fear shows up near the end of a decline, while greed rules at tops.  People always say that they want to sell high and buy low, but human nature prevents them from doing that.

The guy might turn out to be a genius.

On the other hand, I would tell him that if he wanted to get out of the market, then he shouldn’t tie up his cash at all.  I would tell him to keep his cash available, because the next pull back and buying opportunity might present itself before his money is free.

You could also suggest covered calls to hedge his position, and that way he wouldn’t have the tax consequences of realizing capital gains.

[quote=mktsystms] [quote=Reggin]Life is too short to work with stupid clients. Cut him lose and find someone
that isn't such an idiot.[/quote]

Actually, the client is just the opposite from most "idiots."   Markets are controlled by fear and greed, but fear shows up near the end of a decline, while greed rules at tops.  People always say that they want to sell high and buy low, but human nature prevents them from doing that.

The guy might turn out to be a genius.

On the other hand, I would tell him that if he wanted to get out of the market, then he shouldn't tie up his cash at all.  I would tell him to keep his cash available, because the next pull back and buying opportunity might present itself before his money is free.

You could also suggest covered calls to hedge his position, and that way he wouldn't have the tax consequences of realizing capital gains.
[/quote]

Interesting point.

[quote=Soon 2 B Gone]In order to retire rich all you have to do is buy and never sell.[/quote]

That sounds like Warren Buffett.

Munytalks- I will offer this . . . and it's not about cutting your client loose, calling him an idiot, scaring the hell out of him, etc.- it's about approaching everything from his perspective and then educating him on according to what you are hearing, he will probably not accomplish his goals.

First off- what are his goals. Retire at 63? Live on $100k per year? Travel? Weddings for children?

and based on his life goals, what level of risk is he comfortable taking- bracket it because obviously NO RISK is usually best risk for some.

Based on his goals, run some scenarios with his current money in both money markets and in CD's and provide him the probability that based on HIS life goals, he will either hit or miss his goals. If he does miss them, is he willing to sacrafice the boat? retirement at 63? etc. (most likely he will be adament about several of these)

If he can accompish his goals in CD's- then be a good advisor and tell him that you can do it for him unless you don't want him.

If he cannot do it in CD's, show him how he can accomplish HIS life goals and with what approach and asset allocation- then show him  you plan for implementing it.

This assumes you have all the tools to run these scenarios, most effectively using Monte Carlo simulations rather than basic inaccurate averages.

If you provide your client with a solution and monitoring methodology based on his life goals- he's not going anywhere- because you understand HIS WANTS, HIS NEEDS, and HIS DESIRES.

Oh, do this on every client and you not only will keep them, you might actually get referrals from them.

By the way- if you successfully have this conversation- the benchmark is his goals, not an index.

Good Luck-

[quote=doberman]

As you well know, it's important not to let the assets leave, even if they're only in a money market account.

[/quote]

No, what's important is that the client feels comfortable with the decisions that are being made.

It is never acceptable for the advisor to be doing what the advisor considers to be the best thing--what is always acceptable is for the client to be engaged in a strategy that the client considers to be the best thing.

Saying that "it's important to not let the assets leave the account" paints the advisor in a negative light.

The client is 58 years old.  Perhaps he and his wife have plans for THEIR money.  A danger of paying advisors based on AUM is that the advisor begins to think of his client's money as his own.

Talking about one hundred years of market history is meaningless when the market is in uncharted territories. The higher it goes simply means the farther it can fall.  The run up since the post September 11th bottom has far outpaced the historical average gain.

Only the most naive investors sit around thinking that there is nothing to be concerned about.  "Earnings always go up therefore the market always goes up" thinking is not what your clients deserve.

So, what do you do?  Suggest they go into cash and surer than hell the Dow will go straight line to 13,000.  Suggest they hang in there and surer than hell the Dow will straight line to 7,000.

You know as well as I do that you have no idea what it's going to do, so your "advice" is nothing but a shot in the dark.

If you don't hear the bears out here you're not listening.  You ignore them at your own peril.

[quote=haRDcorp]

Munytalks- I will offer this . . . and it’s not about cutting your client loose, calling him an idiot, scaring the hell out of him, etc.- it’s about approaching everything from his perspective and then educating him on according to what you are hearing, he will probably not accomplish his goals.

First off- what are his goals. Retire at 63? Live on $100k per year? Travel? Weddings for children?

and based on his life goals, what level of risk is he comfortable taking- bracket it because obviously NO RISK is usually best risk for some.

Based on his goals, run some scenarios with his current money in both money markets and in CD's and provide him the probability that based on HIS life goals, he will either hit or miss his goals. If he does miss them, is he willing to sacrafice the boat? retirement at 63? etc. (most likely he will be adament about several of these)

If he can accompish his goals in CD's- then be a good advisor and tell him that you can do it for him unless you don't want him.

If he cannot do it in CD's, show him how he can accomplish HIS life goals and with what approach and asset allocation- then show him  you plan for implementing it.

This assumes you have all the tools to run these scenarios, most effectively using Monte Carlo simulations rather than basic inaccurate averages.

If you provide your client with a solution and monitoring methodology based on his life goals- he's not going anywhere- because you understand HIS WANTS, HIS NEEDS, and HIS DESIRES.

Oh, do this on every client and you not only will keep them, you might actually get referrals from them.

By the way- if you successfully have this conversation- the benchmark is his goals, not an index.

Good Luck-

[quote=munytalks]

Remember all the hand-holding we all did during 2001 and 2002?

Remember all the analogies about timing and the market?

Inflation and investing?

I got a very strange call today. A client said he thinks the market just 'isn't going to get any higher' and wanted to liquidate everything. He plans to take it all to his Credit Union to buy CD's- but not long term ones because he's not sure he wants to tie his money up for longer than a year.... he's 58.

I was very good at hand-holding during 2001 and 2002. When the market turned and my clients were making money again, things got easier. People like to make money.

I would like to hear from other advisors out there on how you manage clients' fears when things are going well.

[quote=joedabrkr]

What are his retirement goals, and how does his current asset level compare to what he will need to live comfortably?  Can he make enough in CD's to get there.
[/quote]

What he hears is "Blah, blah, blah, blah."

What you, and any other advisor including me when I was doing it, are unable to understand is how to think like a sixty year old.

Sit there and talk to me about how much risk I'm taking by being out of the market and you'll turn me off for sure.  I know that.

I also know that you are talking about MY MONEY and that until you are my age you'll have no idea how I think of MY MONEY.

The adage, "A bird in hand is worth two in the bush" fits perfectly.  I would much rather earn a guaranteed 5% and a possible 15%.

If you're honest with your clients you'd explain to them that the difference between what you're likely to get them is not that much more than they can get guaranteed if they close their account and put the money in their credit union.

Over twenty or thirty years that modest difference can make a major difference--but when the client is staring at retirement their entire perspective changes.

Those who will survive in this business are those who realize that there comes a day when the only appropriate action to take with your client is thank them for their confidence over the years, and wish them well in the future because it doesn't make sense for them to pay you to manage their money conservatively.

[quote=Soon 2 B Gone]

[quote=joedabrkr]
Excellent advice.  This in contrast to the pablum posted by our friend Soon2BGone/Putsy/NASD Newbie.  It’s amazing to me that the moderators let him continue to come back…but for the fact that he’s entertaining and has significant expertise at test taking, options strategies, discriminatory hiring practices, and paperclip sourcing.
[/quote]

Joe Boy, do you believe that you are competent to advise a client who is 58 years old and wants out of the market that he should stay in?

What specialized training do you have to call that play?

Are you so sociopathic that you simply don't care about your clients?

I am saying that the role of an advisor is to offer good advice on how to capitalize on what that investor wants to do--not to persuade the investor that he is wrong simply so that you can keep him as an account.

If the client wants to go to cash you immediately follow his instructions, wish him well, and ask him to come back again when his opinion of what is going to happen changes.

Your opinion of what is going to happen over the next year is essentially worthless, just like his is.