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'It was carnage': IFAs remember Black Monday

On the 30 year anniversary of the market crash, advisers recall Black Monday, and explain what they learned from that day. 

Today marks 30 years since the great crash of 1987 that became known as Black Monday. We asked some top financial advisers what they remember of that day.

What one IFA describes as the ‘carnage’ of that moment became a turning point for some to abandon the ‘greed is good’ culture of the time. We asked advisers what lessons they learned, and what they think has changed in the years since (which were to present yet more crises and shock events that panic clients).

As one IFA remarks, while the last 12 months have seen double-digit increases, advisers must keep the double-digit falls of Black Monday in mind when talking to clients.

Today marks 30 years since the great crash of 1987 that became known as Black Monday. We asked some top financial advisers what they remember of that day.

What one IFA describes as the ‘carnage’ of that moment became a turning point for some to abandon the ‘greed is good’ culture of the time. We asked advisers what lessons they learned, and what they think has changed in the years since (which were to present yet more crises and shock events that panic clients).

As one IFA remarks, while the last 12 months have seen double-digit increases, advisers must keep the double-digit falls of Black Monday in mind when talking to clients.

Austyn Smith, wealth management director, Austyn Smith Associates

During that time, it was all about making your fortune in the City. I had landed a job at one of the biggest merchant banks around, SG Warburg, in a bid to become a Eurobond trader.

With the ‘Big Bang’ and computerisation, everyone was talking about black boxes and algorithms: ‘nothing could go wrong anymore.’ Then Black Monday hit, and it was carnage.

At that time, in the City, people’s lives were centred on work, it was just the culture, and all of a sudden it was just like a domino effect and everything was sideswiped. People were jumping off of buildings in New York.

I was only 20 years old and saw first-hand what took place on the trading floor. The film Wall Street, released in 1987, springs to mind. It epitomised the nature of trading at that time: ‘greed is good’ is the quote the film became famous for. I knew I wanted to stay in financial services, but I knew then that I didn’t want to be a bond trader.

Markets are very easily manipulated by big institutions, and if clients could see the underbelly of financial markets they would be a lot more cautious. There are winners and there are losers, which is why it is so important to have a defensive stance when investing.

Duncan Philp, senior consultant, Macbeth Currie

I was fairly new to the finance industry on 19 October 1987 and, from what I remember, the panic among most was in trying to get everyone away from equities into cash as quickly as possible. We did manage to salvage the majority of client’s money, but it was a catastrophic event for the industry at the time.

I was with Save & Prosper [unit trust] at the time, and I remember all the information and updates coming from our head office in London, but no one really knew how to cope with it all.

Yes, it was a baptism of fire, but I think we all learned a valuable lesson in not putting ‘all your eggs in one basket.’

Keith Churchouse, director, Chapters Financial

If I could use one word to sum up the 80s it would be ‘culture’. It was the era of the yuppies, and it was becoming increasingly easier and sophisticated to own shares. I recall the BT ‘Tell Sid’ advert.

I was part of a bank at the time. I had considered being a runner, one of those guys wearing a brightly coloured coat ready to run paper orders to the floor trader. It was really fascinating to watch, it was just like a kaleidoscope.

Then in 1986, almost a year to the day before Black Monday came the computerisation of trading. Investors were able to watch real time share values from their own home, you could say it was the first ever element of robo-advice, and it was all very exciting. Yet people were taking secure money from building societies and putting it into volatile markets.

When markets dropped, many stayed put, despite the panic. I would say that since 1987, and the 2007/2008 crash, clients are calmer. Conversations however, must be balanced. We may have seen double-digit increases in the last 12 months, but we must also keep the double-digit falls of Black Monday in our consciousness.

Ivan Lyons, managing director, Investment Solutions

What lessons can we all learn from Black Monday and how can we avoid the sporadic panic that sets in when markets behave unexpectedly? I think when you’re investing for the medium to long term timespan you’ve got to hold it out and realise it always comes back round.

If you have a robust methodology in terms of asset allocation, then market fluctuations shouldn’t be an issue. It’s really about diversification over asset classes, that way you should really be covered. We recommend all IMA sectors and just stay light on Japanese smaller companies, and our clients have never had any qualms with that.

Diversification, diversification, diversification.

Tony Byrne, Wealth & Tax Management

I remember seeing all the headlines in the news that day, there were trees being blown over in the street that had never been blown over before. Falling on cars and people, the storms were so bad, I remember fences in my garden being totally blown over, the winds were so savage.

The market fell at exactly the same time, it was a huge shock. Throughout the 1980s was a real go-go era under Thatcherism where the stock market just rose and rose. I think investment companies were beginning to think it was a new paradigm that it was different this time and prices would keep rising. What they always teach you in history is don't ever think it's different, we always go back to history. If you look at a chart of share performance for the last 100 years you'll see every time there has been a big fall, there is a recovery. If anything you've got to start conditioning your brain to think when the market falls that's the time to buy

With the biggest falls are the biggest opportunities you'll ever have. The big lesson is, keep calm and treat it as an opportunity and not as a loss. You don't lose money unless you sell an investment, so you've got to accept the markets will always rise and fall.

Gretchen Betts, managing director, Magenta Financial Planning

I haven't been in the industry since the crash but I have worked through the Northern Rock crisis and saw it all fall and the panic and we've seen the recovery. So as an adviser you have to have faith in your knowledge that your assessment of the client, your investment choices, any third parties are right for you and the client. We have to remain confident for the client so you can reassure them if those questions come in.

Periods of uncertainty like the crash just reiterate the importance of a globally diverse portfolio, tailored to your circumstances and considering a client's risk profile. Provided you've done all that work with the client and they're comfortable with the risks, which included volatility, and provided you're in regular contact with them I think that a client should have confidence that they are well positioned to ride out any market turbulence.

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