What to Do When Investors Mix Politics and Investing

We are still many months from the next election, but strong feelings about the current administration and presidential contenders are already present. It isn’t too early to prepare yourself for it. And I share a personal story that has unfolded over the last few weeks to provide some ideas.

“I’d Like to Meet With You”

My wife and I, as recent empty nesters, relocated to Parker, Colorado last month. We had a wonderful 15 years raising our family in St. Paul, Minnesota and the time came for something new. We are getting to know new people through our neighborhood and church congregation and they are getting to know us.

One individual, who learned I was an investment advisor and financial planner, asked if he could meet with me as he was unhappy with his current relationship. Now, I am very selective with who I work with because I spend the majority of my time creating content, tools, and helping advisors in The Behavioral Finance Network. If I take on a new investment client it would need to be pretty straightforward as behavioral finance is my passion and love – and I don’t want anything to impact how much time I devote to it.

I told the guy I would be happy to have a call with him to figure out where he is, what he is looking for, and to see if it is something I could help with or at least point him in the right direction. During the course of the call I learned a little about his assets and income needs. I told him I have a minimum of $1 million to work with and he said he used to have that amount, but because of “Biden” it is less than that now. And that’s when things got interesting.

“I Don’t Want to Hear About Your Political Views”

Once he finished his statement, I told him I appreciate that he has strong political feelings. I told him I have clients that have very strong political feelings and viewpoints from both sides of the aisle. I said that I never allow clients to bring up politics and politics will never sway any investment decision we make. Can’t get any more straightforward than that. I don’t think anyone said that to him in such a straightforward way. He was silent. So I continued…

I told him that history has proven stock market performance has nothing to do with which party is in power. They are simply too complex for just one outcome, and the fact that individuals and corporations adapt and adjust to whatever new laws and regulations come about, we ought to focus more on corporate earnings (the real driver of stock market performance) than anything else. And just for fun, I added the following statement, “If you are so upset at the previous downturn because of Biden, you ought to be thanking him for the all-time market highs we just hit.” Pure silence. Political passions are to be expressed at the polls, not in our investment decisions.

What Happened Next

Now, he doesn’t have $1 million but it was just under that amount, so I would still consider it. As we concluded the discussion I told him that he should meet again with his prior advisors and think on what I said. I told him I will not follow up with him – the ball is in his court. The call was very courteous, but straightforward. I used to not be able to do this. In the past I would be quiet and just “take it” because I needed the business and perhaps I didn’t realize how destructive mixing politics and investments can be.

Fast forward two weeks and I get an email from him. It was short and to the point, “I have done a lot of thinking about what we talked about and gained a lot of respect for your view of things and would like to continue our discussion if you are amenable. Please let me know.” Bingo!

I decided I will meet with him. I still don’t know if it will be a good fit, but I am happy to at least share some wisdom and point him in the right way if it won’t work for me. But what I learned is that he is coachable, and if we get in a working relationship he knows exactly what I will expect (and this will be reinforced) and that I am not afraid to say what I really think.

Be Prepared

As we get closer to election season, consider what you will say to a client or prospect that allows strong political feelings and viewpoints to impact their investment strategy. Are you going to allow it? What if they generate significant revenue? What would you say and how do you want to say it so you can be direct, uncompromising, but sympathetic to their strong feelings at the same time?

It would be helpful to have one or at most two pieces of facts about how politics don’t affect market performance over the long term, but realize this is very much a psychology thing. My guess is that I will have several coaching calls with advisors in The Behavioral Finance Network over the next few months to effectively message this, both proactively and reactively when needed.

– JAY

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