Deciphering investors' behavior
As I have traveled around the country meeting with advisers and their clients, I’ve noticed a palpable “antsiness” among investors of all stripes. Most have the sense that valuations are steep, that things have been too good for too long and that the other shoe is set to drop. So, what is the best use of a financial adviser during uncertain times such as these?
An Aon Hewitt study found that investors who worked with advisers during the Great Recession did 2.92% better net of fees than those who did not. Interestingly, what differentiated the DIY crowd from those who received help had less to do with financial acumen and more to do with behavioral coaching. In all markets, but especially in times of elevated emotion, the primary good an adviser can do is to keep their clients from making impulsive decisions. To aid you in your efforts to provide this service, I’ve constructed a list of 12 rules that account for the bulk of investor (mis)behavior.
By Daniel Crosby, a behavioral finance expert who works with organizations to develop products and messaging to maximize positive investment outcomes.