Hellish memories: Advisors recall rock bottom, March 9, 2009

Elizabeth’s note: Today marks the two-year anniversary of the market’s trough after a decline brought on by the financial crisis and the onset of the Great Recession. Now that it finally feels as if the United States is out of the woods — on Friday, the Department of Labor announced the nation added 192,000 jobs in February, with hiring across the private sector — it seemed an appropriate moment to look back at March 9, 2009 — the culmination of one of the worst stretches of time in many advisors’ careers.

The minutes before the market closed on March 9, 2009 are etched into advisor Paul Pignone’s memory forever. He was on the phone with a trader from Fidelity Institutional Wealth Services selling all of one client’s equities.

'I can’t believe I’m doing this’

He felt powerless. “After every third trade, I kept saying, “I can’t believe I’m doing this.” But I had no choice. I had already given the client my opinion,” Pignone says. See: Mark Matson: Stand up to clients or else

In some ways, it’s hard to believe that the market bottomed out two years ago today. Since then, the Dow has risen 86%, to 12,214.38 from 6,547.05; businesses are growing again; clients are putting money back into the market, if a little more cautiously. Since the beginning of the year, investors have put $24.2 billion into U.S. stock mutual funds, according to the Investment Company Institute.

But the events of the spring of 2009 are not a distant memory. On March 9, the Dow Jones Industrial Average was at 6,547.05 – its lowest point since April 15, 1997. The S&P 500 Index was at 676.53, its lowest point since Sept. 12, 1996. With a precision born of the desperation clients were feeling that day, many advisors remember specific details and conversations.

Pignone, of Boston Retirement Advisors LLC, has 250 clients and $50 million in AUM. About half of his clients, which have an average of $350,000 in assets, have been with him for eight years or longer.

On March 9, he had spent 45 minutes patiently going through each fund in this particular client’s portfolio, explaining the positives. His client’s mind was made up. “My role wasn’t to convince him it was to represent how he feels. He wasn’t sleeping at night,” Pignone says.

After months of talk that the market might hit zero, many advisors were meeting with clients first thing in the morning and often were still at the office counseling them until late at night.

Self-doubt struck

Ultimately, some advisors began to question their own advice.

“I was talking to a psychologist every day,” says Advisor Cary Carbonaro, a partner with StoneGate Wealth Management LLC., which is based in New Jersey. Carbonaro splits her time between an office in Orlando and New York. The firm manages about $250 million, and has about 250 clients with an average of $1 million in assets.

Carbonaro says she couldn’t sleep without the assistance of Nyquil, and had began questioning everything.

Despite her own fears, she convinced one of her clients to keep her equities on March 9. The client, an ER doctor in her mid-30s, rarely has time to talk about her portfolio. But that day, she panicked and called Carbonaro with a request to sell all of her equities.

“If she’d have sold that day, she’d never forgiven herself. I had no idea if the market was going to zero. I was scared to death. It was hard to counsel her with logic when I didn’t know if I believed it myself.”

For some advisors, there was little escape from clients’ constant worries. Advisor Gerald A. Cannizzaro, of Retirement Planning Services Inc. who doesn’t manage assets, says he’d field calls early in the morning, at night and on weekends. He’s been an advisor for 29 years and has about 110 clients.

He couldn’t even exercise at his gym without getting questions from nervous investors. “I had to figure out how to work out and give advice,” he said. “It took me awhile to be able to do that.”

Felt like a death march

It seemed like each day was worse than the next, says Marty Kossoff, advisor of Kerkering Barberio Financial Services Inc. in Sarasota, Fla. His firm has 200 clients and manages $325 million in assets. His average client has about $1.5 million in assets.

“At that point, you’re already dead and every day it was like jumping on the body,” he said. “I was tired. None of us were sleeping. It took its toll. Anybody with a moral compass looked inward and tried to figure out if they were doing any good.”

Jeff Moscaret of Moscaret Investment Advisory in Pasadena, Calif., recalls being asked how he was doing at the end of the day right in the heart of the recession and his response was: “It’s just another day getting beat up and run over. How many times can you run over the dead dog.”

He has about 120 clients and his firm manages more than $90 million in assets.

That day was eerily quiet, says Greg Plechner, a CFP with Modera Wealth Management LLC in New Jersey. His firm has 500 clients with the average client having about $2 million in assets. The firm has nearly $1 billion in total assets.

“The news was so low in March that everyone was just so quiet,” he said. “And anyone we did talk to was so irrational.”

Signs of optimism

Yet, there were surprising moments of optimism. Advisor Mike Argiro met with about 25 clients and prospects on March 9, 2009, specifically talking with them about volatility. He had everyone write down what they thought the Dow Jones index would be on July 4, 2009.

To his surprise, every person there predicted it would be higher than it was that day. Argiro is an advisor with Wallingford, Conn., based 4T Financial, which has about 250 clients. Each client has about $250,000 in investible assets.

“It just surprised the heck out of me. I was just floored. It was positive reinforcement for me,” he said. “On that day, I was questioning if this is the right thing to be telling people, and I saw that everyone was hopeful.”

Advisor Tom McGuigan had one client who wanted him to buy equities that day and another client who insisted McGuigan sell equities.

McGuigan is a certified financial planner and principal at Burns Advisory Group in Oklahoma City, whose firm manages about $300 million in assets. He vividly recalls getting encouragement from other advisors that day.

Tom McGuigan: "I remember at a
meeting I asked my colleagues if
they thought the government would get
it right."

“I remember at a meeting I asked my colleagues if they thought the government would get it right, and my colleagues were all positive about us coming out of that tailspin,” he said. “It was helpful that they were logical and could be positive.”

Major opportunities could be found

David Katz, senior portfolio strategist with Weiser Capital Management, began a routine on March 9th that had become all-too-familiar to him with the market bumps. He picked up the phone and called each client, starting at the top of the alphabet.

In the midst of his calls, he got a text from a client asking what he thought of GE’s stock. Katz, who doesn’t buy individual stocks for clients, took a quick break and researched the company for the client. The client, who manages a separate portfolio himself, decided to buy GE shares that day for under $6 a share.

Katz says he felt he should take a leap of faith himself and bought some shares too. “I spent a half hour looking at GE and I thought if this company is a benchmark for the U.S. economy, how can I not buy GE. You’ve got to find some silver lining.”

Two years later

The clients who bought equities in the most difficult time have rebounded, but advisors said some clients who sold that day have paid the price.

Advisor Rick Kahler, of the Kahler Financial Group in Rapid City, S.D., says he was able to convince about 55% of his clients to stay the course. The other 45% he talked into lowering the allocation of equities rather than selling completely. He manages about $135 million in assets.

But one of his dearest clients moved from a 70/30 allocation to a 30/70 allocation.

“It broke my heart,” he says in an e-mail. “But there was very little I could do. As it turned out, they lost $400,000 they were never able to recover.”

As for Pignone’s client, he’s invested in equities again and made back the money he lost. Pignone says if he’d have stayed invested he’d be up an additional 15% to 20%, but he said the client didn’t dally long before getting back in the market.

He doesn’t regret following the client’s decision, but wishes he would have waited until the next day to make the trade.

“I’ll always call clients back within 24 hours. I’ve questioned myself and said, ‘Why did I have to call the traders that day?’” he said.

The long climb back begins

On March 10, the Dow closed the day up 5.7% and the S&P was up 6.3%.