My History in Finance: Crisis Time

Personal Money Planning |

By Gary Silverman, CFP®

Remember the Tech Bubble boom and bust (circa late 90s until 2000)? I do, and we’ll be discussing the lessons I learned and how it kept me out of trouble during the Financial Crisis (circa 2007-2009). This is week five (I think) of what it was like starting and running (maybe the word is surviving) a financial advisory firm.

The first few years were difficult. I knew few people in town, was the new “kid” on the block, and hadn’t a clue how to market a financial advisory firm. But eventually I got my groove, and the business was doing well. I expanded the office and staff and things were running smoothly. Then the Tech Bubble burst in early 2000 and continued deflating through 2002. The terrorist attacks of 9-11 followed in 2001 as well as a recession. These events, plus the first time the stock market was down three years in a row since the Great Depression, scared people so badly that the steady flow of new clients dried up.

It's nice when a business enjoys success and grows quickly. However, this requires spending money to keep ahead of the growth. If the growth stops, the money is still spent, the anticipated rewards don’t happen, and the business can easily go under. As we are in the 30th year of operation, obviously that didn’t happen, but let’s just say things weren’t pretty. I won’t say this “era” was fun, but it was a crucial learning lesson ahead of the Financial Crisis which began a few years later.

The Financial Crisis-induced stock slide started in late 2007 and fell off a cliff in late 2008. The S&P 500 lost close to 60% of its value. Predictions touted we were entering a time that would be worse than the Great Depression. That’s when the lessons learned came in handy.

I sat down with our entire staff and explained to them that things were going to get rough. Some clients would be mad and others fearful. We were going to have to work harder than ever to get them through this. I told them that although the giant firms on Wall Street were going bankrupt, we would be just fine. In anticipation of the effort we would have to put into each day, everyone got raises. None of my calmness would have been possible if it were not for the lessons learned back in 2000-2002. The firm was prepared, I was prepared, and while other advisors I knew couldn’t take it and called it quits, we were setting ourselves up for growth going forward—once the financial bloodletting was over.

Adversity is your friend if you learn from it and don’t forget the lessons.

When the Financial Crisis ended, I was a bit over 50 years old. It was time to decide whether Personal Money Planning would outlive my employment. Would the company cease when I retire or continue past my working days? More on that in the conclusion next week.