It has been a sobering year for Wall Street, in many more ways than one. But for a tiny minority, the financial losses wrought by the careening market were nothing short of unbearable. Here, for example, is what Russell K. Smith, a stockbroker at Deutsche Bank, wrote in a final, despairing memo to some of his clients, shortly before his suicide in October 2008: “Since you are reading this, I have just taken my life. It was necessary because the alternatives were totally unpalatable. I consider you a friend first and a client second. That said, I had a fiduciary relationship with you that charged me with putting your interest first. I can say that I always tried to do that. However, some of the investment recommendations that I chose did not work.”
Smith's despondency and apparent depression over his failed investments are remarkable, but, alas, not so unheard of these days, especially among workers in the financial services industry. There are not any hard numbers to point to, but interviews with retail brokerage executives, financial advisors and medical professionals, and a review of media stories (as well as Internet forums frequented by advisors), suggest that financial services professionals — from advisors at retail brokerages and RIA offices to managers at hedge fund of funds and mutual funds — are experiencing widespread emotional turmoil of a kind not seen in many years. Reports of a handful of suicides seem to be quietly wending their way through branches, on the web and in the newspapers. In short, the bear market that really began in earnest on September 15, 2008 (think Merrill Lynch and Lehman) has taken a terrible toll upon retail financial advisors and other financial professionals — both emotionally and financially. Indeed, the emotional distress caused by plummeting asset values and revenue over the past several months makes the Tech Wreck of 2000 through 2002 look like a walk in the park.
One veteran executive at Citigroup based on the East Coast, who requested anonymity, says he knows three brokers who have killed themselves in the past four months. Separately, he also heard that a UBS broker recently jumped off a parking garage in Houston. These stories are often kept quiet: At a funeral he attended for one of the advisors, it was not well-known among the deceased's colleagues that the person had taken his own life. The Citi executive, who has worked more than three decades in the industry, says it's the toughest time he's ever lived through. Advisors are stressed about their jobs, their careers, their clients' money, their own mortgage payments, everything. Some of them are buckling under the strain of it all, he says.
On top of the stories you may hear discussed in whispers around the office, the media has recently covered the suicides of some more well-known financiers. Obviously, suicide is a complicated issue, and we don't want to imply that a bad business environment is, alone, responsible for a person's decision to take his own life. That said, there are a few sad tales that seem to have been triggered by market forces. An executive at a failed Maryland-based subprime mortgage lender ended his life early last year by jumping off the Delaware Memorial Bridge. German multi-billionaire investor, Adolf Merckle, reportedly threw himself under a train after losing a fortune on shorted Volkswagen stock. And, recently, David Kellermann, acting chief financial officer of Freddie Mac, was found dead in the basement of his home in an apparent suicide.
The case of René-Thierry Magon de la Villehuchet, who managed money for rich European aristocrats, was perhaps the most widely reported. He was discovered dead in his Madison Avenue office in New York, after losing a reported $1.4 billion with Bernie Madoff. Sleeping pills were discovered beside the body, but there was no note. Before his death, according to a report, he called a client in Paris, sounding gloomy: “I have to fight for my clients and myself. It's a complete nightmare.”
And so retail financial advisors find themselves in the eye of a painful global recession. Financial firms have folded, many more are downsizing — thousands of professionals have lost jobs. The downturn has crushed client portfolios and devastated financial advisors' own retirement plans, as the value of company stock in deferred comp plans was wiped out.
A Cauldron
Let's face it: Managing other people's money — in some cases their life savings — is a stressful occupation. Advisors are careful to position themselves as consummate pros, as financial experts. And shepherding clients' financial assets carries with it unique pressures — pressures that can push some to blow off steam by indulging in self-destructive habits (drugs, alcohol, promiscuity), or to outright clinical depression.
And this kind of response is possible even in raging bull markets. Dr. Alden Cass, a clinical psychologist who counsels financial advisors, found that 23 percent of the brokers he surveyed in research in 1999 could be diagnosed with clinical depression; another 38 percent exhibited mild-to-moderate symptoms. (Cass surveyed 27 advisors, males aged between 23 and 32, who worked for seven major firms at the time.) And again, this was in 1999.
In the past year, FAs have come under far more intense pressure, Cass says. “When you are beaten down every day with bad news, it can become traumatic. My practice has probably tripled since then,” he says.
Dan Timm, a principal at Edward Jones in charge of branch development, says: “In the 26 years I have been in this business, this is probably as much stress as I have seen in branches and heard in clients' voices. We have had our fair share of reports of stress and anxiety.”
Jim Tracy, director of business development at Citi Global Wealth Management, echoes Timm's assessment. “Most advisors have been through difficult times before,” he says, “but few have been through this type of cycle.”
Again, there are no statistics to show an increase in mental health problems as a direct result of the recent bear market. But the National Suicide Prevention Lifeline reports an increase in calls of 36 percent in 2008, from a year earlier. (The figures are not broken out by occupation.) And at some local hotlines, call volume doubled. In addition, past studies on recessions have established a correlation between unemployment and suicide. For example, a 1910 U.S. government study that recently surfaced on incidences of suicide by occupation during the panic of 1907, reputedly put bankers, brokers and company management at the top of the list — at least twice the average rate.
In 1929, at the outset of the Great Depression, with the unemployment rate at 3 percent, there were 14 suicides for every 100,000 people. By 1933, unemployment jumped to 25 percent, and the suicide rate increased to 17 per 100,000 — the highest rate the U.S. has ever experienced. Kevin Caruso, founder and executive director of Suicide.org, a suicide prevention, awareness and support organization, notes there were 11 suicides per 100,000 persons in the U.S. for 2005, the last time data was compiled. (Official national suicide statistics for 2008 won't be released until about 2011.) The survey, released by the Center for Disease Control, does not break out a category for financial professionals.
Fortunately, Caruso does not think the rate has leapt significantly in the current market. “We do not know what the current rate is, but it is clear that there is no huge spike,” Caruso told Registered Rep., in an e-mail note. “Unemployment has hit 8.5 percent and may go to 10 percent, but that is not high enough to cause a spike.”
What To Do
Of course, suicide is never simply the result of external factors like financial or business hardship, no matter how dire. “I caution you that there are a lot of other things that come into play,” says a Merrill Lynch executive. Psychiatrists would agree: The motivations for suicide are in fact tremendously complicated, and often include an overriding sense of hopelessness and despair. A bad quarter or two at the office is not likely to be the sole precipitating cause. In the vast majority of suicides, victims have pre-existing psychiatric disorders, according to the American Foundation for Suicide Prevention. Studies show the number one cause of suicide is untreated depression.
Still, there was no escaping the enveloping gloom that gripped the capital markets and the general economy — at least, until a rally came along in March. “The advisors would tell you, man, this is tough emotionally to deal with,” says Timm, referring to the steep drop in the stock market, a drop that wiped out about 12-years of gains by early March with the Dow closing at 6,726.
One large wirehouse, which does not want to be identified, told Registered Rep. the number of calls to its own mental health hotline rose about 11 percent last year. And at least three more financial advisor suicide stories have recently surfaced in the blogosphere. On one Registered Rep. forum, a poster claimed a broker at a branch office of a large brokerage killed himself on March 17. “It was a tragic occurrence by an experienced and matured [financial consultant],” the blogger wrote. Registered Rep. was unable to verify the claim. But these are the kinds of stories that are making their way through advisory branches.
Professionals we spoke to weren't surprised. Financial advisors, says Alan Youngblood, director of Merrill Lynch's Employee Assistance Program (EAP), take the recent market rout — and erosion of clients' wealth — “very personally.”
“We are now seeing the impact of this new stress and it is manifesting itself in alcohol and drug abuse; in troubled relationships and marital stress; we are seeing it in the suicidal and self-destructive behavior on the street,” says Theodore Kurtz, a licensed psychoanalyst who treats financial advisors.
Financial advisors are supposed to be made of tough stuff, type-A personalities who have the stamina and the will to drive through a brick wall — over and over again. But human resources pros take no chances on employees' health. A blogger on another Registered Rep. advisor forum wrote that one firm held “mandatory meetings for their advisors to discuss feelings and give them the hotline phone number.”
And Merrill recently introduced a one-hour seminar for advisors called, Finding Equilibrium in Difficult Markets. “The seminar speaks to what they are experiencing and what it is like out there,” says Youngblood. Merrill's companion webcast for managers examines how they should respond when an advisor's performance and motivation significantly suffers.
At Citi, Jim Tracy says “ramped-up” training is helping. “We want our advisors to be fully engaged every day they walk in here,” he says. Meanwhile, Edward Jones has launched Motivational Mondays and Wellness Wednesdays, with experts from the fields of psychology.
Youngblood and Tracy say they are not personally aware of any suicides at their firms directly tied to the market upheaval. “Merrill is a large place where we do hear, of course, about deaths and suicides,” says Youngblood. “Our role at EAP is to respond to the group this is impacting.”
Merrill's Finding Equilibrium program is aptly titled for a seminar that penetrates a sensitive topic. “There is one slide we show at the end of this seminar that I really like - and it is addressed to advisors and to what we are seeing and experiencing,” Youngblood says. “The slide says, ‘This is not your fault.’”