An Independent Fiduciary Can Be Your Best Friend (and Security Blanket)
No one has the right answer. This weekend’s news papers and financial blogs are filled with every prediction imaginable (from economic disaster to boons) and financial advice to fit each prediction.
With the markets swinging 500 points in opposite directions, this is not the time to embark on market predictions and changes in investment strategies.
Steep, drastic price plunges are not fun. Like the free-fall drop on a roller-coaster when your stomach does its own loop-de-loop, these prices plunges elicit a real and physical reaction. Panic is scary. A racing heart beat, cold sweats and sleepless nights are subjects of cliches. But, when you are experiencing it yourself, it ain’t a cliche. It is very real.
From the deepest wells of our very being, panic surges forward. The visceral emotional response becomes its own reality. Emotion as reality. That is never a good place to be. And certainly, not a time to be making decisions.
Prudence on the other hand, provides the required antidote to panic. In the perennial push and pull between heart and mind, prudence provides the counter-weight to panic. Defined as “care, caution and good judgment, as well as wisdom in looking ahead” (see, www.dictionary.com), prudence requires the mind to prevail over the heart.
The key to extracting oneself from the distorted reality of pure emotions, one needs a trigger, or a technique to break the panic spiral. Within the world of managing and overseeing retirement assets, care, caution and good judgment can be supplied by an Independent Fiduciary who can review and assess your portfolios against the plan’s Investment Policy Statement (IPS). Call her. She is paid to be prudent.
Hopefully drafted with the assistance of professionals and during a period of lessened volatility and other external pressures, an IPS reflects the prudent judgment of plan fiduciaries. The IPS, in effect, is the road map for wisdom in looking ahead. An Independent Fiduciary should always have the IPS in hand.
Have the investment performance of each of the plans’s asset classes evaluated. Determine if any portfolios need to be re-balanced in order to reflect the allocation among assets classes envisioned by the IPS. Instruct your Independent Fiduciary to make certain recommendations and then implement them.
Taking specific prescribed actions can deflate the power and energy of panic. The key is to make sure that these actions had been well thought through before the specter of panic arises on the horizon. An Independent Fiduciary can help allay the fear and the imprudent actions which a volatile market environment can inspire.