Trying to sell investment advice to people in oil country is quite annoying.
Oil prices decline by 75%, and what do people say? “Well, it’ll be back. Don’t know when, but it’ll be back.” “We’ve all seen booms and busts before.” “Remember 1986? [This was a particularly nasty time in the oil & gas industry.] We got through that one, didn’t we?” IE–what goes down must come up.
Stock prices decline by 5% and what do you hear? “I wouldn’t invest in the stock market. That stuff’s too risky for me. I’d much rather buy into another oil and gas well.” “You seen what’s happening to stock prices lately? You need to watch the news.” “I remember what happened in 2008. I lost 20% of my money that year.” IE–what goes down stays down.
Anybody else have this kind of silliness where they live?
Oil prices climb to new highs, and people say “This time it’s different. It’s not price-driven. It’s technology-driven.” “High oil prices are here to stay.” “The only place to put your money is in the oil field. That’s where the money is.” IE–what goes up must stay up.
Stock prices climb to new highs, and people say “It’s just a matter of time before it goes down again.” “Yeah–I’ve seen this before. In 2007 and in 1999. Never again will I be a sucker for that stock market crap.” IE - What goes up must come down.
If you’re talking about things like indexes, those usually don’t go to zero, but they have, usually as a consequence of war or revolution. The Nikkei index is still at roughly 1/3 of it’s value in 1988. Now maybe it’s recovered in total return terms (I haven’t checked), but that’s a long time for being down and not coming up…
If by silliness, you mean that people are assuming that whatever happened in the last few months is what’s going to happen for the next few years, well, yes, there’s recency bias. We all have a tendency to suffer from that a bit if we’re not careful, and often when we actively try to fight against it, we overcompensate.
Your average retail investor really likes upside volatility, just not on the downside.
The biggest challenge your going to face as an Advisor is to be able to explain an investment idea / strategy to a client (who has only a very basic understanding of investments) in a way that makes sense to them and convince them that your recommendations are better.
Every quarter I prepare a market and portfolio commentary that I use as talking points in my meetings. I have also developed a set of slides / presentations I would use to address common issues or concerns a client brings up in a meeting (like your clients oil addiction issue).
Also - I would start asking more questions in the meetings and do less talking when a client starts going down that type of path. (Oh - you think it makes sense to take all your money and invest it into one oil well? - tell me more? How is this a good investment strategy? How much income is this going to produce on an annual basis?)
Use some client stories to help re-inforce your message - I had a client who thought investing mostly all his money in real estate was the best. He was making rental income - then came along 2008-09. (Then ask a nice lead in question - what do you think happened? Yep …he blew up and lost all his money). You think stocks are too risky? - tell me more? Why are they risky? What do you mean by risk?
I would also suggest you give more thought as to what type of clients you want to work with (and show it to the client) and services you provide. When you are meetings a prospective client, most of the time, they have no idea what type of service they are looking for. You need to be able to illustrate what it is that you can do for them in a way that is very simple and easy to understand.
(If an investment client is engaging you to provide advice and then they don’t want to follow it - that’s not really a good fit for you as the advisor. Eventually you will either get frustrated with them because their not following advice and disengage them, or the markets turn and you get fired).
my experience is a paralell to yours but is slightly different given i live in an oil consuming province.
my guess is that your clients think oil will rebound because they are so heavily invested in it, based on what they invest in, where they live and all they hear.
my clients also think oil will rebound but it is more derived out of cynicism. my clients think oil will rebound because big oil will find a way to screw the average gas consumer eventually. in normal times, it is an obsession in Ontario to complain about gas prices and how the oil companies are probably making 90 cents on the dollar of all gas sold. not many people here really want the price to go up, they just assume it will because they’re part cynic and part masochist.
on the other hand, a large percentage of my clients are happy to buy the stock market when it is down but this is likely due to the average IQ of my clients being 10-20 points higher than where you’re at. (this is not a dig at where you’re at btw, just that i’m from a town where 90% of my clients are tech guys, professors and professionals who serve these professionals). i’m sure if you drive 30 mins down the road the experience would be different. this is also based on me noticing a distinct difference between my smarter clients and less smart clients.