Slipped up? Wish the advice arrived sooner?
We have written recently here about how to prepare for the unexpected and how to protect yourself from future upsets, but what if you are too late? What if the upset has already happened?
We are here to help you understand how to react and how to manage your own financial crisis.
It doesn’t matter how well prepared you might be or how much advice you take. We will all hit those occasional speedbumps in our financial lives. Taking the hit from a financial upset and knowing how to move on is often the most difficult task for any investor.
Let’s assume that the damage is already done. You have just lost out due to some unforeseen event, be it exchange rates, stock market performance, change in your employment or something in your personal and family life. Scary times. What next?
First: Sit back, get calm and evaluate.
The worst decisions in history have always been made on a knee-jerk. Don’t be the next one on that list. Take the time to judge whether you are in a position to react in a calm and informed manner to the situation. If you are not, decide who to ask for help. Sometimes, the most important role of a professional advisor, whether in finance, law, tax or any other field, can simply be as the objective voice of reason.
Second: Understand the damage.
The tendency after any shock is to over-react and respond disproportionately. This can be more damaging than the original problem. Crisis management is about appropriate and effective response. In order to properly implement a fix or response, we need to know what hurts and why. Think like a paramedic attending to a patient. If the ankle is broken, a full-body cast and triple-heart-bypass is not appropriate and might do more harm than good.
Third: Plan the recovery – slowly.
No big problem was ever fixed on the first day, but every crisis presents its own opportunities.
We need to understand that a cough or a hiccup in any financial plan doesn’t have to be a setback. Think of it more like a reset button. Better still, think of it as someone accidentally bumping into the table where everyone was playing ‘Snakes and Ladders.’ Just because the pieces have moved and you’re no longer where you thought you would be, that doesn’t mean that the rules have changed. Snakes are still snakes. Ladders are still ladders. The fact that you and the other players might have lost ground, gained or changed places is of no consequence. The only requirement is a slightly revise route to your target in the top corner of the board.
Many people see the role of a financial planner or investment advisor as purely a portfolio builder. Creating a bulletproof investment structure for all seasons would be the perfect achievement. In reality, we all have to concede that life will come along and bite hardest when we’re not looking.
The key role of any financial professional is, of course, to prepare contingence for, and protect against, potential future risks. Any advisor worth their salt should be right there beside you when things are going badly, not just waiting for praise when times are good.
In summary, don’t try to hide, don’t deny the bad situation and don’t wait to ask for help. Whatever problem you have just encountered, you can guarantee you’re not the first victim and won’t be the last. We look forward to speaking with you in good times and in bad. When it comes to crisis management, the best advice I ever received was from a friend who had worked in very difficult situations in law enforcement:
“When faced with a difficult situation, always look to the pros: proper, professional, proportional. If you can’t do all three, then call in someone who can.”