Five Questions With: Angela Thomson

It’s been an interesting year or so for certified financial planner Angela Thomson and her colleagues in her industry. Much has been made of the one-year anniversary this month of mortgage giants Fannie Mae and Freddie Mac being placed in conservatorship by the government and financial services firm Lehman Brothers filing for bankruptcy. Both developments sent shock waves through the financial markets.

Thomson, founder and principal at Coastal Financial Planning in Lincoln, looks back at the lasting effects a year later.

PBN: It’s been a year since Lehman Brothers went bankrupt, but you say the collapse of Bear Stearns in March 2008 was a bigger shocker. What do you recall about it, and how did your clients react?

THOMSON: What I recall about that day is everyone wanted answers. There had been a lot of speculation about their financial stability in recent days, but no one had expected the collapse. It sent a sobering message to the American public as this was a company that had survived the Great Depression.

Bear Sterns also triggered the collapse of other smaller institutions as well as Lehman Brothers, a company that at that time Treasury Secretary Paulson deemed was not salvageable.

PBN: How have things changed for you, your business and the financial planning industry after those collapses?

THOMSON: Bear Stearns collapse did not directly affect the asset management side of my business, as I did not hold that stock within my portfolios. It did impact all portfolios' performances, as it took its toll on the economy and the feeling of prosperity that some consumers may have been experiencing. Many clients called and wanted reassurance and my take on what was going on, particularly as the market declined.

The aspect of my business that has changed the most is that the old rules of “buy and hold” have really gone away. Now in the new economy, you are forced to take profits early on – as there are no guarantees for a future reward.

PBN: What has remained unchanged?

THOMSON: Sad to say, but Wall Street greed will always exists among a select few, and the consumer will always be attracted to the allure of quick money, which will lead to bad decisions on the part of the investor. Also, natural market cycles will always exist. The Bear Sterns failure was an anomaly that caused a bad cycle to extend itself.

PBN: Have things in the financial world returned to normal, or are they getting there, or will they never return to the way things were more than a year ago?

THOMSON: In the financial world, from the adviser’s perspective, compliance is becoming more stringent, which benefits the consumer. As far as the investment markets go, in my opinion, we are returning to a positive cycle in the market, and I think the bottoming out has ended. My sense is the fourth quarter of 2009 will be positive. If the consumer is still not back into the market, they should start moving in now and, of course, the prudent thing to do would be to dollar cost average back into the market.

PBN: Could all of this turmoil and turbulence have been avoided? If so, how?

THOMSON: Volatility is the nature of the markets. If you don't feel comfortable with this type of investment, the consumer should stick to CDs and money market funds. You can certainly temper the risk and turbulence in your portfolio by diversifying your portfolio and lowering your exposure to volatile stocks and mutual funds. The adviser should always manage the portfolio to the individual client’s risk tolerance and time horizon. That is the golden rule of sound money management. You can never avoid the stock markets' turmoil – it's inherent – but you can reduce risk.