We’ve all encountered them: The prospect or client who wants to go it alone. They want to manage their own portfolio.
Well, here’s one approach you can use:
First, ask the question, “Can I share something with you?” (I like this phrase because it’s non-confrontational. It doesn’t activate the prospect’s ego, leading to an argument you can’t win. It neutralizes it.
Then you can show them the latest DALBAR study.
It doesn’t matter much what year you use. The results for individual DIY investors are almost always dismal: According to the 2019 DALBAR Quantitative Analysis of Investor Behavior, the typical do-it-yourselfer achieved an annual real return of just 1.71%.
Compared with the S&P 500, do-it-yourself investors lagged the S&P 500 by huge margins:
• 4.35 percentage points, annualized, over five years;
• 3.46 percentage points, annualized, over 10 years;
The reason: Bad market timing decisions. People pile into the market at the wrong times, and then they panic and sell at the wrong times.
Why? Because people are irrational, and are hardwired to make sub-optimal decisions.