In Nan They Trust

Today, conversations that used to center on maximizing gains are now about minimizing losses. And as if the recession were not causing enough angst for advisers like Sabel, they also must contend with a tidal wave of public skepticism about money managers, triggered by the Bernie Madoff scandal.

So what's it like feeling responsible for the future of so many scared, suspicious, and worried clients who want to know their money will be there when they want -- and need -- it most? Just listen.

This has been my most difficult year as a financial planner. In 1999, we used to say you could pick an investment by throwing a dart at the wall and still do OK. I certainly didn't think about people losing 10 or 20 percent of their money, never mind 30 or 40 percent, like many have today. Portfolios made an average of 8 or 10 percent annually and, in some years, much more. I remember two clients who were in their late 30s, both earning a lot of money -- more than $200,000 combined. I recommended a particular fund to them, and the wife said, "Why should I pick that? It only made 32 percent last year. I'm going with this Janus fund -- it made 90 percent." People had unrealistic expectations. Contrast that with today. People thank God if they can break even, and that's only in the most conservative investments.

These are tough, tough times, shocking even. It's hard to watch what's going on, but I don't have anyone calling to blame me. The news is in the paper and on TV every day. It's beyond my control. Even if you're losing 30 or 40 percent, you know your planner isn't doing a bad job, because almost everybody with a typical investment portfolio has lost that much since the market's peak. There are those who have made some money during the turmoil, but they are willing to take more risk, or may have been heavily invested in gold, managed futures, or shorting the market. The only investors supposedly making money on a regular basis were Madoff's clients, and we know what happened to them. Somebody recently told me a story about putting 100 percent of their money in the Sealy Fund. I told him I never heard of it. "Sealy mattress," he said. Some people really feel that way -- that it's not safe to let anyone handle their money. I can't blame them. For instance, a fund combination I have often recommended had lost money only once in 30 years. Last year, it was down 23 percent. So here I am telling my older clients: This is something with a good history. It's conservative. Let's put your $100,000 in it. Now what do I say? I feel terrible, even though I'm not alone. Every planner is in this kind of situation.

This is the year when I thought I might finally be able to start coming to work late one day a week. Instead, I'm coming in earlier, and I work at night from home. I can't turn it off. I think that's the case with a lot of planners: You live the job, especially when it's bad. I start my day listening to Squawk Box on CNBC, checking e-mails, reading The Wall Street Journal online. I know I have to stop it on weekends, but you just become so involved. Even on vacation, I still have my iPhone attached to my body. It's relentless. For the first time, the Financial Planning Organization, a national trade group, has been sending e-mails on how to de-stress. We're being advised to take yoga classes or do some other kind of exercise, and to take time off. When I go to a social event, people kind of look to me for advice. I really hate that. I don't want to talk about business -- I want to get away from it.

My clients who are in their 70s and 80s really rely on me because they need to use some of their money now. They don't have as many years to wait for a turnaround as someone in their 40s, 50s, or 60s. It's a big responsibility. Sometimes I wake in the middle of the night and wonder what additional things I could be doing. I've talked to many planners and they are having the same thoughts. It's never been like that. Every portfolio I handle needs to be examined more closely. I might have to look someone in the eye and say, "No, you can't retire at 65 like you wanted to." Or "You can't give your kids that money. You don't have it." Sometimes I hedge what I'm saying. I'm really thinking they will have to work until 80. That's being realistic.

I recently had a client come in who is 60 and separated. She is the top salesperson at her company, but she fears it may go under because of the economy. She has no idea what will happen to her. "No one is going to hire me over a 30-year-old who will compete for my job at half my salary," she said. So what do I tell her in response? I have to be candid. While I hope her company can weather the next nine to 12 months, she needs to keep her options open, and start looking for another position as a backup plan. But we both know the reality -- with her retirement plan severely decreased at work, she will have to work until at least 70. Maybe longer.

In general, clients who have lost jobs are not in a panic yet, but it's very stressful. They're OK for now, but if the recession is long-term, they're not going to be. Some are saying, "Maybe I shouldn't do the same job I've done for 20 years, maybe I should look for something else." And they might have to accept that they aren't going to make the same kind of money they once did. It's life-changing.

The most important thing a planner can do today is listen to clients and then try to provide perspective. Yes, you have to worry about money but also other things, like life insurance and long-term care insurance. Because everyone's money is down, those become even more important -- they protect your family. This is also the time to put more in your 401(k), not less. I've been warning people for years that Social Security was not meant to last until age 95. We can't live off it. And I have very few people who come to me with pensions anymore. So all of that means we have to save more. Personally, for the first time, I've been more defensive with my own money and putting more aside. I tend to be far more aggressive with my own assets than with my clients' money.

The main reasons people come to me initially are a spouse has died or they're in the middle of a divorce and they're getting a 401(k) rollover -- they have no idea what to do. Sometimes I'll see the children of a client who has died and they're receiving an inheritance. It's usually a milestone event that gets people to seek out a planner. Today, however, they are coming for a different reason. They're telling me: "I've been doing OK managing it my way, but my money is tanking! I need somebody to help me." It's not for me to tell someone how to spend their money. A planner's objective is to make the money, do what the client wants. It's not just the investments; it's looking at your whole life. Financial planning is about whatever is important to you. For me, that's traveling. As long as I can travel, I don't care if I have a dime left over. I plan for everyone to live to 95, but who knows? The car's going to keep going, but the rusty parts will fall off. So yes, I want you to save, but I also want you to live. I have clients who are financially secure and won't spend a penny. It's ridiculous. I tell them, enjoy your life. The money itself is secondary.

The perception of living well is so different from when I grew up, as a '60s child. I think there was one kid in our high school whose parents divorced. Mothers did not work, of if they did, it was part time. A family could live on one salary. Real estate was cheap. Today, living well means you need two cars, a house, maybe a summer home, you take vacations with your kids in the Bahamas, you have a flat-screen TV. Can our kids live the way we have been? I think things will have to change. The world will be much more clouded when this is all over.

Like everybody else, I've watched my own portfolio go down a big chunk since last fall. Whether you've lost $50,000 or $300,000, it hurts. In fact, a client may only have $50,000, so if they're down to $30,000, that's even more painful. It's real money. Still, in this past year I've only had one person cash out -- against my advice -- and one other left. That's pretty good considering the circumstances.

I wish I could say I saw this coming in September. But since October I've been trying to minimize the damage by rebalancing people's portfolios. For example, if someone was 70 percent in stocks and 30 percent in bonds, the stock free fall has already made them 60/40. So now I need to make them 50/50, because bonds carry less risk than stocks. I'm able to say, "Look, you're still in market, so if it goes up, you will, too." But you can't be greedy now, you have to be defensive. I just can't say, "Let's leave it the way it is," and then see someone possibly go down another 10 or 20 percent before there's a turnaround. More and more people are saying let's make it safer, let's make it so I can sleep at night. I always ask them how they would feel if the market goes down another 10 or 20 percent before it goes back up. Could they handle it? A few years ago they could. Now, most say no. They can't handle the downturn much longer.

Actually, I started advising people last June to get more conservative. Maybe just 10 or 15 percent. But the drop in October happened so fast that I told them they couldn't sell then. "You can't overreact," I said. The truth is, if people had gone against my advice and sold their bonds and other investments in October, they would probably be a little better off today. But still, if you took all your money out, how do you know when to put it back in? You're likely to miss the best rebound we will ever have. It won't happen in a day, but it could take place in one week and then it's too late if you're not already invested.

Sure, it's going to be a while before the market comes back. But it will, I have no doubt. It's still a world economy and the United States is not going to fall apart. In the meantime, I'm on the phone all the time with clients. I'm seeing them more, I'm e-mailing them more. I'm doing more reassuring. My bachelor's degree is in psychology and I'm using it. You want to put a sign out that says "Money psychologist." Money is very personal. I tell my clients I can be unemotional about their money; they can't.

People like Bernie Madoff have made things worse for all of us. It's created more distrust. There are sleazes in every business. You need to talk to a planner about what they do, how they invest the money -- before you give them a dime. Ask a lot of questions. Ultimately, it's up to an individual to check on who they use. More than ever.

Beyond something monumental like the Madoff scandal, however, it's very easy for an unscrupulous money adviser or manager to take advantage of a client in less noticeable ways. For example, I had someone who was being charged a 3 percent load on her mutual funds by her previous planner, who wasn't even licensed to practice in Massachusetts. In addition to that fee, her planner was charging 1.75 percent annually to manage her account, meaning he collected 1.75 percent of everything she invested every year. It is not illegal to do that, but it's unethical -- you either charge the load or the fee, not both. The client didn't have a clue. He said he was managing her money as a favor, "because most of my clients have a lot more money."

It's also more crucial than ever to diversify your investments. One of my bigger clients used to have one-third of her money -- at least $300,000 -- in a single investment. I said: "Look, the fund manager could die. You just can't put so much money in one place." She finally took it out in December 2007, and it's dropped about 50 percent since. When I spoke to her at Christmas, she said, "Don't give us chocolates this year; give us T-shirts that say 'diversify.' "

One problem with this job is a lot of clients have become my friends. I just spoke with one who lost her job after 30 years in the pharmaceutical industry. She was hoping to retire in five or six years. But not now. I'm worried about her as a friend, not just as a planner. Then I worry about clients' kids -- are they going to get jobs in this economy? And I have clients with cancer -- I worry about their health. I go to people's funerals because their parents have died. And I worry about the stock market, even though I know it isn't going to help. I'm the queen of worry. I can't help it.

Seventy-five percent of all planners are men. It used to be more like 90 percent. For a woman with a young family, this is a difficult job to take, because you really have to do night work. Younger clients aren't available during the day. When I started, I had more retired people and my children were already teenagers, so I had some leeway. Almost all of my peers have been in the business over 10 years. Starting out in this atmosphere would be like trying to open a construction business or a restaurant today -- it's not the right time or place. I know of several people who have been planners for over 20 years and are ready to leave the business. They're feeling demoralized. When planners go to meetings they come back saying it was like a funeral. And in a way, all that makes me feel better. There's some comfort in knowing it's a universal problem. Believe me, there are some days when I say I'm tired of it all, too. But when the market comes back, I want to be there to make people's money grow again.

I have this client, Rosemary. She's a doll. She's 72 and doesn't have a lot of money. Her investments have probably gone down only about 16 percent because she's really conservative, but to her that's a lot. The other day she came in to the office with an armful of daffodils and tulips. I asked her what the occasion was. "They're for you," she said. There was a note attached that read: "I believe you have my assets in as good a place as possible in these chaotic times. Please take good care of yourself." That's what keeps me from jumping out of the window.

Mark Pothier is the Globe's senior assistant business editor. E-mail him at mpothier@globe.com. He wrote this story using notes and transcripts from a series of conversations with Nan Sabel.