Behavioral Finance: Helping Yourself and Your Clients During These Uncertain Times

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By Cheryl Harwell | Case Planning

Behavioral Finance: Helping Yourself and Your Clients During These Uncertain Times

The Coronavirus, or COVID-19, is wreaking havoc not only on the markets but also on people’s psyches. This pandemic is causing a lot of angst and even some panic. It is definitely a challenge to remain calm when everything around us seems to be in chaos. In such an environment, financial professionals are in a unique position. They can help themselves and their clients manage anxiety about money, investments, and market volatility.

To help manage stress, we must first take care of ourselves. Be sure to get adequate sleep, exercise, healthy food, clean water. Find ways to relax and enjoy your time with your family. Limit your time watching the markets or listening to the news. Advise your clients to do the same.

Finally, help yourself and your clients become self-aware by taking time to run through the 4 “R’s” of behavioral finance: Recognize, Reflect, Reframe, Respond.

The 4 “R’s” are explained by Chuck Wachendorfer of “Think 2 Perform” as follows:

Recognize. Pause and ask yourself the following 3 questions: What am I thinking right now? Emotionally, how am I feeling right now? Physically, what am I doing right now? Just the elements of a reality check: thoughts, emotions, physical experience. Practicing several times a day will make self-awareness happen. If I’m aware that I’m angry, excited, exuberant, etc., then I am also aware that I could be in the position to make an irrational decision.

Reflect. Once I recognize my cognitive, emotional state, then I reflect on the big picture. When I reflect on my values and what I care about most, hopefully, I begin to calm down. The process of reflecting and calming forces the engagement of the cognitive brain, rather than just the emotional brain. It won’t make anyone smarter, but it will increase and improve their access to their intelligence. That’s why we say it’s not about how smart you are…it’s about how able you are to access how smart you are. That in turn allows us to move to the third “R.”

Reframe. Reframe my thinking. Framing is how I normally think about something. Reframing is reevaluating and changing how I think about something. Now that I’m able to access the cognitive part of my brain, I can begin to weigh my alternatives and the advantages and disadvantages of each option. I change how I’m thinking about something in light of the values I just reflected upon. If I think, “I value this; therefore, I should do this,” we can move to the last “R.”

Respond. I can respond. I can make decisions consistent with my goals and values. These types of decisions are more rational.

It’s important to note that on average, over time, rational decisions work better than irrational decisions. This does not mean irrational decisions never work, nor does it mean that rational decisions always work.

Hopefully, the market and this pandemic will settle down and our country can return to some sense of normalcy sooner rather than later. Using the above practices now, and at all times, can help us to weather the storms we experience not just during extreme times but also on a regular basis throughout our lives.

If you’d like to discuss Behavioral Finance, please send me an email at

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The SPS Family consists of two broker-dealers, Sigma Financial Corporation and Parkland Securities, LLC; a Registered Investment Advisory firm, Sigma Planning Corporation; and a back office, known as BD Ops, LLC. The companies, based in Ann Arbor, Michigan, are under common ownership and led by an experienced executive team. The SPS Family prides itself on personal service to independent registered representatives and investment adviser representatives from across the United States. We consider our representatives family as we strive every day to provide them “Independence. DELIVERED.”

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