Close Close

Financial Planning > Behavioral Finance

4 reasons clients need you now

Your article was successfully shared with the contacts you provided.

I have to admit that when editor Jamie Green asked me to write something about what advisors should be telling their clients these days, I was at a bit of loss to come up with something that hadn’t been covered ad nauseam every seven or so years, at least as far back as the Arab Oil Embargo in 1977.

It’s true that the challenges have varied widely over the years. Yet the current stream of bad news — increasing market volatility, China going down the tubes, the EU threatened on both financial and immigration fronts, Russia flexing its military muscles around the globe, oil price volatility and the Iran nuclear deal, to name but a few — appears to be particularly troublesome. 

Still, the traditional advisory litany of reminding clients of previous discussions about how markets tend to go up and down, but historically even out to track upward, managing risk through diversified, custom-allocated portfolios, and regularly buying low and selling high through rebalancing, appeared to once again be the client conversation du jour.

But upon reflection, it occurs to me that perhaps there is another dimension to client conversations that is frequently overlooked, especially during trying times such as these: one that speaks to clients’ understanding, rather than their psyche. 

As I’ve written many times, I’ve come to believe that a financial advisor’s job is to protect clients from themselves (succumbing to greed and fear in their investment decisions, and procrastination in their saving decisions), from the financial service industry and the financial media, by extension.

Once again, I’m not saying that everyone in the financial services is a bad actor; but, as we all know, there are powerful financial incentives to put their own interests ahead of the clients’, and some folks can’t seem to be able to resist the temptation.

Now, the traditional client/advisor communications (described above) are usually effective in saving clients from their inclination to buy high and sell low. But in my experience, the biggest reason that retail investors need to be protected from the financial services industry is because they don’t understand how it really works.

And while most advisors do (I say “most” because it’s my observation that it takes an advisor between five years and 10 years of industry experience to figure out what’s really going on), they rarely make a formal effort to transfer this insight to their clients — which is a shame, as this understanding is the real key to financial success.

See also:

5 steps to boosting revenue with deferred income annuities (DIAs)

100 facts your clients need to know about annuities