An 84-month bull market is a low probability event. So was a Trump victory. And while statisticians can point to numerous other outcomes that have, recently, defied the “odds,” the nature of randomness[1] paradoxically, remains constant. Let that percolate for a few seconds.The art and science of prediction have taken a heavy blow to the body, straining credibility from opposite sides of the political spectrum. In fact, one thing that the GOP and Democrats can agree on unambiguously is that political forecasting is dangerously unreliable.
Against that backdrop, a new reality is dawning in the sphere of adviser-client relationships where fiduciary responsibility is either everything or nothing. No kidding. Whether DOL’s Fiduciary Rule prevails or dissolves, it is probable (there’s that word again) that trust and confidence will dominate the financial advisory landscape like never before. Even long-time relationships, including those that have survived the transition of generations, may become subject to doubt where little to none existed, even in the face of major market declines such as the Great Recession[2].
The 2016 presidential election has caused or unearthed or stirred or kindled or awakened or enabled or illuminated or empowered a Pandora’s box of differences between friends, among families, across communities. Such diversities, including those that have, in recent years, been celebrated by many, are now giving rise to new or renewed scrutiny and wariness.
Such uncertainty may, on the surface, have little to do with past performance and professional competency. It may have everything to do with conflicting visions of our shared future. Herein lies what may be the greatest challenge in this generation: How to reconcile an outlook for tomorrow that is inherently and severely polarized between optimism and pessimism.
It may become increasingly difficult to encourage clients convincingly to stay the course and stick with their investment discipline in the face of national or international uncertainties borne of new political realities. Political differences between clients and advisors have been for the last few decades not only tolerated but beneficial in achieving a more balanced perspective on economic and financial issues and developments. Today, however, may be fundamentally different. Those same differences of opinion are likely to be magnified painfully as social advances and reversals are pursued and presented fervently with impassioned support or against active resistance.
Regardless of political persuasion, we have, with high certainty, entered a time of change. And while we think we may know the answers, we may not this time. Certainty, like stability, while desirable, is rarely an effective strategy under pretense. What we have, at our core, is our humanity, that is, our well-honed ability and willingness to listen, without judgment to our clients as they openly discuss their fears as well as their hopes. For in that space of open and honest communication comes understanding and, out of that understanding, comes appreciation and mutual respect, and from that respect, comes trust and confidence.
So as we approach those days that are holy in different ways to different people, may we all find joy in the true spirit of Christmas and Hanukkah and the many blessings that we, as Americans, are so fortunate to experience in our lives.
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[1] Randomness is the lack of pattern or predictability in events. A random sequence of events, symbols or steps has no order and does not follow an intelligible pattern or combination. https://en.wikipedia.org/wiki/Randomness
[2]The Great Recession was a period of general economic decline observed in world markets during the late 2000s and early 2010s. https://en.wikipedia.org/wiki/Great_Recession
