Friday, October 10, was one of the darkest days of my professional career. Indeed, that whole week was one of the most emotionally exhausting times I’ve ever had in my work. It was a helpless feeling watching the portfolios of my clients in a free fall, melting away like ice cream on a hot summer day, for seven straight trading days. Then on that Friday, to watch the Dow hit 7,777 intraday was overwhelming.

Jim Cramer of CNBC’s Mad Money show was telling people to sell, small investors were cashing in their stocks and took $50 billion out of mutual funds in one week, and investors calling Fidelity were on hold for 20 minutes before reaching a broker. As I watched the panicked herd rush to dump stocks, I had a brief moment of wondering if the free fall would ever stop and if I was the crazy one not to be panicking with them. Of course, that day had all the trappings of a market bottom. Whether it was remains to be seen.

In that moment, I found myself wondering if everything I had learned and believed about asset allocation and buy-and-hold investing was defective. I wondered if everything I knew and understood about investments was wrong or had changed. I wondered if I had in some way failed my responsibility to my clients. Shouldn’t I have seen this coming?

Certainly, most of us knew the real estate party would come to an end. We knew that requiring nothing down and lowering borrowing standards would eventually result in losses to the lenders and foreclosures to some borrowers. What most of us didn’t know was the manner in which Fannie Mae, Freddie Mac, and investment brokers pooled and partitioned these sub-prime loans in a way to get AAA ratings for them, and sold them to investors. Those investors then used the questionable AAA ratings to secure short-term bank loans which allowed them to highly leverage their positions.

There were a great many sophisticated players close to the inner workings of this situation: the mortgage lenders, investment bankers, regulators and members of Congress. They all missed the warning signs which, in hindsight, now appear so obvious. Even they didn’t see this coming.

Still, how we got here is little consolation to those of us that have lost so much. The portfolios I manage are far more than numbers. Behind those numbers are the lives, businesses, and faces of real people. To watch my clients’ holdings be down 25% at the bottom of the fall was as painful for me as it must have been for them.  In fact, I began to wonder whether it may have been more painful for me. I made that assumption based on the fact that I had only heard from ten percent of my clients in the preceding two weeks.

On that dark Friday, I decided to take the initiative and call my clients. To many financial advisors, this may have seemed like a really dumb idea. A few told me that, rather than initiating calls to clients, they were wishing their phones wouldn’t ring.  Of the clients I talked with, not one was panicked. They were concerned, but they all were taking the drama of the markets in stride. Some of them were maintaining that perspective by deciding not to pay attention, which in the short term is a good thing.  After reaching out to my clients, I actually ended the day in a much better mood. Maybe they didn’t need to talk about the economy, but apparently I did.

About Rick Kahler
Rick Kahler, Certified Financial Planner (CFP®), MS, ChFC, CCIM and President, Kahler Financial Group, launched his professional career at age 18, selling and appraising real estate. In 1981 he founded Kahler Financial Group, and in 1983 became the first fee-only financial planner in South Dakota. In 1998 he was appointed to a five-year term to the SD Investment Council, overseeing a $6 billion portfolio. He was commended for making exemplary strides in a time of unprecedented volatility in the world’s stock and credit sensitive markets.

He is active in the Financial Planning Association and has served in a variety of leadership roles including the Journal of Financial Planning Advisory Board and Chair of the 2004 National Retreat. A pioneer in the “integral finance” evolution of the financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee, and the Financial Integration Residency Workshop for financial planning and counseling professionals. He is one of only a handful of planners nationwide who employs a certified counselor in his own private practice, offering financial coaching and counseling to his clients.

Kahler is a nationally renowned speaker and educator. His workshops and seminars draw some of the world’s wealthiest and most influential people. He is co-author of two revolutionary new books titled Conscious Finance: Uncover Your Hidden Money Beliefs and Transform the Role of Money in Your Life (FoxCraft, Inc., 2005) and The Financial Wisdom of Ebenezer Scrooge: Transforming Your Relationship With Money – 5 Principles to Financial Freedom & Prosperity, (HCI, Inc., 2005).

His work has been published or cited in USA Today, Wall Street Journal, Journal of Financial Planning, Registered Representative, Money Magazine, Counselor Magazine and through his work as the co-founder of Onsite’s Healing Money Issues workshop featured in in Wynonna Judd’s new book Coming Home To Myself, (New American Library, Sep 2005). For additional information or to learn more about Rick visit www.kahlerfinancialgroup.com or www.consciousfinance.com.