Tag: behavioral-finance

For the modern-day financial advisor, it’s all about keeping clients on a straighter path toward the long-term goals they have agreed upon with you. Right?

And there’s piles of research showing that advisors who demonstrate a high degree of behavioral friendliness tend to have clients who are more solidly anchored to their financial plans. The benefits of commitment to the plan for the client is obvious, but there is also a knock-on benefit for advisors in that they usually see less client attrition.

How do you measure up in this regard? A new quiz will give you a score in just a few minutes.

It’s been 12 years since the last prolonged market decline, a reality that propagates complacency.

Having spent many years in the investment world, it sometimes makes me want to flail my arms and scream, “We’ve got to wake up people!”...but the living, breathing, human being in me also empathizes with advisors, who have been caught in a tough spot.

Do they hold onto positions designed to protect against the eventual market decline, even though many of those instruments have dragged a bit on performance (and we all know how quickly many clients will point this out) during this prolonged rising uptrend in stock prices?

Perhaps you’ve heard this saying: “There are old pilots; and there are bold pilots; but there are no old, bold pilots.”

The same applies to investing because at the end of the day – for both pilots and investors – it’s about their respect and tolerance for risk.

Said another way, the key to longevity is survival.

Perhaps the most striking characteristic of economic bubbles – which is also what fuels their very existence – is our blindness to them.

Historically, few have correctly called a bubble in advance. And yet, in modern times, people have been asking if we’re in the bubble since 2010. What gives?

A colleague recently shared with me a story about a January tradition of the Kiwanis Club of Cape Fear in Fayetteville, NC, which holds a contest to see who can best predict where the Dow Jones Industrial Average will end the year.

She described how some members have a thoughtful internal debate while others jot down numbers seemingly at random. By the following year, pretty much no one remembers the guess they submitted, and rarely is the winner someone within financial services. A chiropractor won in 2020, a national defense analyst the year before.

What made the contest sound so fun to me is that the guesses and winners seem so haphazard and unexpected. Why? Because most predictions are garbage.