'Just say no' applies to clients, too

The No. 1 way to help investors is to tell them firmly when they're making a mistake, finance writer says
JUN 06, 2014
The most important thing advisers can do to help the financial performance of their clients’ portfolios is to help them resist their own investment instincts and fears, financial writer Nick Murray said. Advisers' best value proposition is helping clients with planning, providing long-term historical perspective and behavioral investment counseling, Mr. Murray said at a Loring Ward adviser conference in Washington on Tuesday. Mr. Murray, who's written 11 books for advisers and several more aimed at clients, said 47 years in the business comes down to a single conclusion. "The dominant determinant of real-life, long-term investor outcomes is not investment performance, it's investor behavior," he said. Advisers owe it to clients who panic and think the "end of the world" has come when equity markets decline to say "no" when asked to cash portfolios out of stocks, Mr. Murray said. "Tell them their retirements will never recover from this mistake." Advisers shouldn't be promising to bring "alpha," or any other investment concepts that investors don't really understand or even care about. Advisers should ask clients whether they are going to outlive their money or whether their money will outlive them, Mr. Murray said. "About 99 out of 100 will say they don't know," and advisers should offer to sit down and help them figure it out, he said.

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