As inflation, market volatility, the COVID-19 pandemic and Russia-Ukraine war continue to present challenges for the economy and markets, investment executives at Charles Schwab and T. Rowe Price provided a few positive and negative predictions for 2022 and beyond.
But they agreed that advisors should persuade clients to remain invested in the market.
Financial advisors should work with their clients to make sure they don’t move to asset classes that “will hurt them in the long run” as a result of loss aversion, Omar Aguilar, CEO and chief investment officer at Schwab Asset Management, said Tuesday, during a virtual panel with reporters.
Advisors should also try and prevent clients from making bad investment moves based on “recency biases” in which they make decisions based only on the most recent information they heard, or due to “anchoring” in which investors remain fixated on something that happened to them in the past, such as the 1970s or 1980s, and expect the same result now even though current trends are different, he said.
Overall, advisors play a big role in helping clients understand how to rebalance, how to stay in the market, and understand what is in their best interest for the long term, he added.
Agreeing, Sébastien Page, head of Global Multi-Asset and chief investment officer at T. Rowe Price, noted: “I always say, if you give me two seconds to give someone investment advice, if we’re going up the elevator between floors four and six, I’m going to say ‘stay invested, stay diversified.’ And I think, in the current environment, it’s a good way to think about how advisors can help their investors manage their behavioral biases.”
Aguilar and Page also made several predictions during the event. Check out their predictions in the gallery above.