Navigating a whiteout

I took to skiing quite late in life. The first week I spent on the slopes, the weather was perfect: great snow conditions, sunshine; and beautiful blue skies. It fooled me into thinking this skiing lark was easy. What I remember most vividly about my second week was being on the mountain in similar blue-sky conditions when the weather changed suddenly. Within a few minutes, I was lost and disorientated, caught in a complete whiteout. By sheer luck, I was found by a ski instructor who let me follow her group and got me safely off the mountain. 

The lesson was clear: if you are going to venture into that environment, you need to be properly prepared, and if you don’t know what you’re doing, you need to be guided by someone who does. She was very emphatic on that point. Even if I could translate her French, it would probably be unprintable!

Navigating the world of investing can be as tricky as skiing down a mountain in a sudden whiteout. Without proper preparation and guidance, you could easily find yourself lost and disoriented. Even when markets are performing well and are relatively benign, you need to be prepared for those times when market conditions – just like the weather on the mountain – can turn without warning.

That’s why the role of an adviser is so important both in preparing their clients ahead of time for the unpleasant shocks that will predictably occur and being a trusted guide when they do. It is at times when things are at their worst that, as a profession, we need to be at our best. And, there is no better time than during a market downturn to demonstrate the value of your knowledge, skill and experience.

And it is experience that is key, because over and above your professional qualifications and expertise, it is also your life experience that can make all the difference to the client relationship. Nowhere is this more valuable than when it comes through helping them through a storm.   

This month marks my thirty-third year working in financial services. Over those 33 years since 1990, the UK stock market1 has achieved an annualised average return of 8%. Annual returns have been positive in twenty-three years and negative in ten1, three of which really stand out in the memory: 2000 (Dot Com Crash), 2008 (Global Financial Crisis) and 2020 (Global Pandemic). 

For the first one, I was mentored by an experienced adviser who educated me on the value of staying disciplined. The second one, the GFC, was more challenging but I learned to stick to the plan, tune out the noise and help my clients. By 2020, I was familiar with the routine – staying in my seat had become a habit. So if, as Sir John Templeton said, that the four most dangerous words in investing are: “this time it’s different,” then perhaps the four most comforting are “we’ve been here before.” To which we might add: “and you’re going to be ok.”

I learned a number of important lessons that afternoon in the Alps, but perhaps the most valuable was that if you are going to venture into an unfamiliar and potentially dangerous environment, go along with someone who knows what they’re doing. And whether it’s skiing down a mountain in a whiteout or navigating the vicissitudes of the stock market – it helps if they speak with the voice of experience.

  1. MSCI United Kingdom Index (net div., GBP) 01/01/1990-31/12/2022