Why This Time May Be Worse For Investors (Psychologically)

We are down about 5% from ALL TIME highs. And investors are beginning to get very concerned. Why?

It’s because of the media and human preference for instant outcomes and instant gratification. I don’t want to get political, but one can’t ignore the swings in the market and news coverage from a single tweet. Saying one thing one day, the complete opposite the next day. It is the pendulum of uncertainty that is constantly swaying.

In the past, we may not have felt the uncertainty because our leaders kept conversations private and orderly. Now we are privy to every impulse by our leaders, and that is causing sharp swings in investor sentiment, outlook and market prices.

Time to Play Offense

I run The Behavioral Finance Network. It is for an exclusive group of advisors that seek to apply behavioral finance principles in their practice and increase the value they offer their clients and prospects.

In August alone, I wrote three extra (and timely) pieces for advisors to send their clients and prospects. The three pieces were, “3 Tips to Stay Calm When the Markets Aren’t”, “The Inverted Yield Curve” and “Lesson’s from Argentina’s Stock Market Crash”. The feedback was extremely positive – these were very helpful and much appreciated by advisors. Clients actually replied to their advisors thanking them for the thoughtful comments and timely guidance.

This is not all. I have had individual coaching calls with advisors who have clients asking about going to cash and waiting out the recession. Why is this happening with the markets down just 5%? Can you imagine what will happen when the markets are down 15% or 20%? It could be bedlam.

This is why advisors can’t sit on their hands. Investors’ threshold of pain may have changed. If it was a 20% decline before, it could be a 10% decline this time – mainly because the information and impulsive responses are changing daily, and the media is providing excellent coverage.

Your Value is at Stake

As I speak at advisor conferences around the world, one thing many advisors are concerned about – as they should be – is their value proposition. Advisors who are doubling down on their value being a plan, portfolio, strategy and trust may find their business shrinking in the not too distant future. Forget Roboadvisors. I’m talking about Personal Advisory Services. They offer a plan, portfolio, strategy and access to a CFP for 30bps or less.

You aren’t that different. The sooner you realize the value of yesterday is not the value of tomorrow, the sooner you will be able to adapt and improve. The humble will acknowledge this and view it as a chance to reinvent themselves.

The real value of an advisor going forward is in effective behavioral coaching (note the emphasis). I have met advisors that have a BFA designation and yet know nothing about applying behavioral finance to their business. I have met other advisors that have read many books on behavioral finance, but don’t have a strategy to incorporate it into their daily business. Effective behavioral coaching is not just talking a client off the ledge. It is making sure they never get there to begin with. Behavioral coaching isn’t just about improving investor returns (though it could help); it is about improving investor experience.

The Opportunity is Great

The average financial advisor is lazy, reactive, cheap and has a strong preference for the status quo. That presents a tremendous opportunity for you to poach assets from them. While Personal Advisory Services are a significant threat, our ideal client is doing business with another advisor right now. So what are you going to do to compel them to switch to you?

Proactive, consistent behavioral coaching messages can be part of your differentiator. It is something your clients can easily forward to friends and colleagues and it is something no other advisors are doing. Content from marketing libraries or news curation newsletters are junk. They fill your client’s inboxes and actually encourage them to disengage from you. Be careful what you send!

Timely behavioral coaching messages work. Members of The Behavioral Finance Network are reporting back higher engagements (openings of emails), more clicks, clients are actually replying thanking them for the message and it has helped a few advisors close multi-million dollar business. Why? Because it is different. It is refreshing. And because it is highly valued for any emotional investor.

I create content that you could use and brand yourself – ready to go. If I can help you elevate your value and gameplay, let me know. In the month of September I will be on-boarding five new members to The Behavioral Finance Network. If you would like to be one of those, reply to this email or schedule a call today.