Litany of Disaster Archives - Don Connelly & Associates

Leveraging Behavioral Finance: Understanding Client Decision-Making Patterns

/ by Don Connelly / Managing the Relationship / 0 comments

Financial advisors looking for an edge in influencing their clients’ decision-making need look no further than behavioral finance. Behavioral finance is a game-changer for advisors seeking to deepen client relationships and drive better decision-making outcomes.

Understanding how psychological factors influence financial decisions can help you build trust and guide clients through the emotional and cognitive challenges of investing. When clients feel understood and supported, their confidence in their financial plan—and their advisor—grows exponentially.

Should FAs Allow Clients’ Political Opinions to Influence Their Investment Decisions?

/ by Don Connelly / Investing Wisdom, Managing the Relationship / 0 comments

Here we are again—another presidential election year. If it’s like the last couple of elections, financial advisors are sure to see some clients wringing their hands over which candidate will win the White House and how that will impact the financial markets and their investments. At the very least, you’re likely to get an earful of some clients’ political viewpoints—which is fine if they don’t try to correlate them with how they should invest their money.

For decades, investors have tried to find some correlation between elections and investment performance, hoping it will foretell how a particular outcome will impact their portfolio so they can adjust their investment strategy appropriately.

Of course, if you search far enough, you might be able to uncover data that supports such a link. But you’re not going to find any that decisively shows a causal relationship or enough of one to warrant serious consideration for changing investment strategies based on election results. Still, some clients have such strong political views that they see a connection in all aspects of their lives, including how they invest their money.

Get More from an Advisory Relationship with Client-Centric Investing

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With the 2008 global financial crisis fading in the rearview mirror, investors are slowly regaining their confidence in the stock market with a halting willingness to take on more risk. However, many still find it challenging to overcome the trust deficit created by financial advisors who view them as assets to be managed rather than people with life ambitions.

To those advisors, the market indices and benchmarks mattered most. However, to the client, it was all about their financial future. All too often, advisors focused on standard deviation, Monte Carlo analysis, and risk-return lose sight of the emotional characteristics that drive investor behavior. They then become perplexed when their clients decide to break from a perfectly good investment strategy to follow the herd over a cliff near a market bottom.

6 Essential Investment Tenets to Instill in Your Clients for 2024

/ by Don Connelly / Investing Wisdom / 0 comments

The stock market has taken investors on another wild rollercoaster in recent years. The market recovered from a bear market in 2022, and after a solid up year in 2023, there’s bound to be another one at some point. Going into 2024, the market will keep investors guessing, which is why helping your client maintain a long-term perspective is essential.

We can’t know what stocks will do today, next week, or next month. But we know that, over the long term, stocks will continue their century-long advance. Reacting to short-term swings in the market means moving in and out of the market at the wrong times, locking in permanent losses, and often missing out on the biggest gains in the market.

It’s Time to Have Another Conversation with Your Clients About Risk

/ by Don Connelly / Investing Wisdom / 0 comments

With the stock market setting its sights on new highs, is it time for advisors to have another serious conversation about risk?

With all that is going on across the globe—war in Ukraine and the Middle East, persistent inflation, rising interest rates, a looming recession, and a divided government likely headed to another fiscal cliff—the stock market appears to be climbing a wall of worry. But how long can that go on? When will it end?

As the market nears new highs, that is the question being asked with increasing regularity by market analysts, media pundits, nervous investors, and financial advisors alike. While the question is palpable, the answer is not so obvious.

Overcoming Information Overload: What Advisors Can Do to Help Their Clients

/ by Don Connelly / Best Practices / 0 comments

Living in the digital world, with its instantaneous access to information, has made us smarter and more empowered. In many ways, it has leveled the playing field for clients who now have access to much of the same information once only available to investment professionals. Information is so highly valued that it is churned out 24/7, accessible on any number of devices people carry around. For clients especially, this should be a good thing, right?

The barrage of headlines and hype around market events often leads to behavioral mistakes, like following the panicky herd over the cliff during a market selloff or frantically trying to buy into the market after a massive rally. Studies show it is the primary reason why investors consistently underperform the market.

Keep Your Clients Focused on What’s Knowable and Important

/ by Don Connelly / Managing the Relationship / 0 comments

The media has always run rampant with scary headlines. That’s how they increase readership or website traffic. However, in this period of increased market volatility, economic uncertainty, geopolitical upheaval, mixed COVID signals, and deepening political divisions, the headlines can be incredibly overwhelming or, at the very least, extremely distracting.

Trying to consume all the news coming at us 24/7 is like trying to drink from a firehose. It’s critical to understand that the barrage of bad news and hype around market events can trigger emotional reactions that often lead to making costly decisions around their finances.

Use the Perspective of Time to Move Your Prospects to Action

/ by Don Connelly / Presentation Skills / 0 comments

Undoubtedly, you are familiar with the theme: You have a prospect in front of you with a clear objective. After gathering all the facts and probing them on why it’s important to them to achieve the goal, you present an iron-clad solution that checks all their boxes, throughout which they nod in agreement. You lay out the steps to get started and ask them for their approval to move forward. When they shift back in their seats, you know what’s coming—the pause, the hesitancy, and the anxiety over making a decision, leading to the standard, “We’d like to think about it.”

After addressing their concerns, walking them through how your solution helps them achieve their objective, once again with approving nods, they again shift in their seats and confide that they just don’t think it’s a good time to start investing.

That’s a very good sign—a strong indication you’ve done your job—up to this point. But your job is not complete until your prospects take action to improve their situation. All they need now is a reassuring nudge. All they might need is some perspective—some time perspective.

What Not to Do in Building Lasting Client Relationships

/ by Don Connelly / Managing the Relationship / 0 comments

For financial advisors, building lasting client relationships is as essential as it is challenging. There’s really no more important aspect of an advisor’s practice to ensure sustainable growth. While many advisors try to focus on facets in their practice to bring more value to the relationship, they tend to gloss over what not to do, which can have an even more significant impact on their relationships – and not in a good way.

Here are four key “what not to do’s” all advisors need to proactively convert into a priority to-do list.

Being a Financial Advisor in Uncertain Times – What You Need to Know

/ by Don Connelly / Best Practices / 0 comments

As I write this in mid-October, 2020, the stock market is sitting right at an all-time high. But there’s still an ongoing pandemic – and a presidential election looming. Either of these things can cause big short-term swings in stock prices.

That means things are pretty risky at the moment. In the short-term, anyway.

As financial advisors, we have to help our clients understand that risk, and help them manage their money so they can accomplish their financial goals, but also so they can sleep at night in the meantime.

Those of you who have been around since before 2008 know this process well. For those of you who are just getting started, here’s what you need to know.

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