EDMONTON - When the last equity bear market ended in 2002, one financial adviser said it was the first time in two years that he didn't hate when the alarm went off in the morning, summoning him to work.

By The Edmonton Journal

EDMONTON - When the last equity bear market ended in 2002, one financial adviser said it was the first time in two years that he didn't hate when the alarm went off in the morning, summoning him to work.

Around that time, one adviser quit his job and became an artist, finding what had once been a hobby more tranquil than continually explaining to clients why their investments were withering away.

A few years later, yet another adviser sold his practice to become an educator, teaching retirement and investment seminars.

Life isn't a lot of fun when you face an onslaught of calls from clients upset about things beyond your control, like a credit crisis and a housing-market implosion. Such is the case for many advisers now, with United States markets officially in bear country, having suffered more than a 20-per-cent decline from last October's highs.

Excel Funds recently held a conference call for advisers offering some insight into what they might do to keep investors from pulling out their hair, or more importantly, their money.

Dan Richards of Toronto-based Strategic Imperatives said it's important that advisers do some hand-holding during bear markets, scheduling meetings or individual phone calls or conference calls to answer client questions about portfolios and the markets in general.

"For every call you get, for every unhappy customer, for every concerned client, another 10 or another hundred out there aren't calling," Richards said.

"Clients don't expect advisers to have all the answers, but what they want is to feel they are important enough for the adviser to pick up the phone and call. They want to feel the world isn't coming to an end, and they want to feel their adviser is proactive."

One way to soothe jittery investor nerves is to "marshal facts" -- that is, "being prepared with specific, concrete facts to support your point of view."

One conflict of interest between advisers and investors during bear markets is the defensive strategy of parking money in cash. Advisers don't get trailer fees when money is on the sidelines, so they seldom advise putting it there.

But Richards said advisers can explain the timing between pain and gain as a reason for clients being fully invested -- "the gain is down the road, the pain is immediate. When you're in cash, the pain is down the road, the gain is immediate."

And that's when advisers should stress investing for the long term, like 10 years.

"But it's getting harder and harder to get people to focus that long. Five years and in some cases three years is considered long, and I think we have to resist that with a frank conversation -- 'If you're in this for only three years, then we have to completely change the kind of investment strategy, and here's the price you pay for doing that.'"

To drive home the long-term message, he brings out U.S. stock-market charts going back some 80 years, with one-year and three-year rolling returns depicting great volatility, but charts of rolling 10- and 15-year periods showing "volatility doesn't disappear entirely, but it really flattens out."

Richards said advisers should resist the temptation to slag the media, those nattering nabobs of negativism, who print headlines about housing foreclosures and reduced bank earnings.

"Don't slag the press, because frankly it just puts you in a defensive light. Save some of the dire headlines now, and when markets recover, have conversations with clients: 'My job as a financial adviser is to help you maintain an equilibrium, to keep the highs from being too high, and the lows from being too low.'"

He suggested advisers explain the opportunity in rebalancing a portfolio face to face with a client, demonstrating what it is and the statistical difference it can make. And building up a holding over 12 months may be more palatable.

He also warned against taking the path of least resistance, merely steering investors towards investments that have worked recently.

"If you've loaded up in commodities and been in Canada, for example, you're a hero. Clients are congenital performance chasers. The easy thing to do is say 'this fund has had a great track record, let's get into it,' or 'this fund has been a dog and it's time to get out,' and maybe it is.

"But often if the reasons you were in something in the first place were right, they're still right. Where advisers really prove their worth is making tough recommendations. If you want easy advice, turn on the TV -- Jim Cramer has always got an easy recommendation for you."

Richards says advisers should use the 50-50 rule: "For every 50 words you say, your client should say 50 words."

Ray Turchansky, a freelance writer and income-tax preparer, may be contacted at turchan@telusplanet.net