In the past three years of the economic downturn, we've read and heard a lot of talk about "apologizing." After all, we've all been hit pretty hard, financially and emotionally, and it must be someone's fault, right? Why were the people responsible so reluctant to say they were sorry? And why, after so much anticipation, did the sparsely-presented apologies have such a hollow, empty sound? Merriam-Webster's Online Dictionary suggests that an apology "usually applies to an expression of regret for a mistake or wrong with implied admission of guilt or fault..." Ah, there's the bug, stuck on its back!
If the financial community had come forward to apologize, that would have been the equivalent of accepting blame. This might have sent the financial volcano into a whole new series of eruptions and meltdowns. So, the strategy was, "say nothing, keep your head down, and wait." But that strategy was not the best one, either. Laying low and not speaking out left the public to its own interpretation of events. An "omission" soon became an "admission." As a result, the financial community was blamed for a whole host of problems, many of which were far from its jurisdiction -- and therefore beyond its responsibility. The investing public has summed this up as "lying and denying," and concluded that "you just can't trust Wall Street."
In retrospect, the financial community missed an opportunity to inform the public by defining the extent of its responsibility for what happened. More important, in the eyes of the investor, financial institutions lost their connection with compassion, understanding, and commitment, and jeopardized their long-term relationships with clients.
When the financial environment gets tough, it is wise for both investment professionals and investors to talk more, not less. Communicate sincerely and profoundly, not superficially. Seek the greatest level of transparency. Face adversity head on, with courage and uncompromising principles. Don't back away or give up. This isn't easy: Some days it feels like the battle of Gallipoli, and advisers and investors think they'll never survive the experience! On the other hand, it's important to acknowledge that the problems do not lie all in one camp or the other. The upside of surmounting these challenges is that you are stronger and more proficient for the next series of crises in the future.
Perhaps advisers and investors need a word for a type of apology that expresses sympathy and an acknowledgment of pain without implied admission of guilt or fault. That does not mean that no one is to blame! But to initiate constructive dialogue and repair wounds, we have to start with an understanding of what someone else might be feeling. We're already familiar with this kind of apology: "I'm so sorry it rained and the picnic was ruined... I feel so bad that you broke your ankle just before your trip... My heart goes out to you over the loss of your mother... I apologize that I recommended that job, and it did not work out." So, we're not responsible for the weather, an injured ankle, the death of a loved one, or how the job went, but we still feel a sympathetic sense of loss and pain when we care for someone who is suffering. We may even empathize from our own experience. In essence, we offer a sympology.
If Wall Street offered even a whisper of a sympology, we did not hear it. This is where the financial community took a wrong turn in the road, and why there is now such a vacuum of credibility. I've actually heard investors say "Those Wall Street people care only about themselves, and getting rich off of us." Maybe investors need to hear an infrequently discussed fact: we investment professionals need YOU, the investor. Without you, we have no career, no purpose, no income, and no professional identity. The last thing we want to do is "get rich off of you," at your expense. Many advisers are compensated as a percentage of the assets they manage. Their success is directly correlated to yours. When your assets go down in value, the advisers endure a financial penalty. So when financial storms are raging, advisers are using every technique they know to protect your capital and your family's welfare. Payment for performance is a powerful incentive.
How might Wall Street phrase a true sympology in such a way as to re-establish confidence and trust? It might begin with an expression of sympathy, and an acknowledgment of the enormous pain and loss of the past three years. It might sound something like this: "We recognize that you have made sacrifices in the interest of your financial future, and you may be frustrated and disappointed with the result. It's painful to have expectations foiled by events out of your control. That angst is widespread, and we in the financial community feel it acutely. We know we have to take responsibility for our role in the downturn, and do whatever is necessary to regain your trust and confidence."
Without investors, advisers have no professional world. Without the financial community, investors have no place to invest. While we can't forget -- and shouldn't, we can seek understanding -- and should. For financial professionals and investors alike, this must begin with a heartfelt appreciation of a point of view outside of their own.
While attribution of responsibility has value in the recovery process, meaningful healing can begin only after the doors of dialogue have been unlocked. The first step to turning those keys is to express genuine sympology, and this begins with each one of us.
"Sorry Seems to be the Hardest Word" is the title of an Elton John song.
Saly A. Glassman is author of It's About More Than the Money: Investment Wisdom for Building a Better Life