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How to advise when the toast hits the floor jam side down…

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Uncertainty from the global pandemic has been replaced with uncertainties of a different kind. Higher global inflation and rising interest rates have resulted in headwinds for strong growth. Clients are once again asking their financial advisers tough questions about their portfolios, where to invest and if they should be moving their money until the pathway ahead becomes clearer. It’s not easy being a financial adviser in these times, however, providing sound coaching in this setting can add a tremendous amount of value to clients.

Our research shows that clients paid a behaviour tax of as much as 6.5% in 2020 in discretionary unit trusts and over 4% in 2021 in the retirement income option (living annuity). The root cause is shifting investments around (switching) to avoid turbulence and to try and take advantage of market surges. This is a recipe for the behaviour tax. To coach clients to help them avoid this behaviour tax will add tremendous value but it’s not as simple as telling someone they’re being “irrational” in market turbulence or providing them with facts and figures. This didn’t stop people hoarding toilet paper in 2020 and it won’t stop clients switching money around during uncertainty. Advisers need to know the difference between emotional and cognitive biases and advise accordingly. In the case of fear-related emotional biases like loss aversion, a good strategy is to coach the client out of the hyper-emotive state before providing facts and figures geared to persuade them otherwise.

This infographic is designed to assist in providing these principles along with advice strategies rooted in financial therapy. With us, investing is personal.  We are here to help you understand your clients better and engage them with appropriate strategies to keep them invested and avoid the market turbulence trap.