/ by Don Connelly / Investing Wisdom / 0 comments
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.
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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.
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How to Talk to Clients About Market Volatility
/ by Don Connelly / Investing Wisdom / 2 comments
You don’t hear people talk much about market volatility until stock prices suddenly sell off. But when your clients watch their portfolio value decline unexpectedly, it can be terrifying, leading many to make potentially costly mistakes, such as selling into a steep market decline. Though we’ve experienced many volatile markets over the last 20 years, advisors must help clients understand that volatility is not their enemy.
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Winning the “Why Do I Need a Financial Advisor” Argument
/ by Don Connelly / Best Practices / 0 comments
Long before it became a field of academic study, legendary investor Benjamin Graham knew a thing or two about behavioral finance. Graham went on to say, “In the end, how your investments behave is much less important than how you behave.”
For financial advisors, understanding how emotional and intellectual processes combine to influence investors’ decisions offers the opportunity to help their clients avoid costly mistakes and optimize investment outcomes.
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Helping Clients Understand the Normalcy of Market Corrections
/ by Don Connelly / Investing Wisdom / 0 comments
As a financial advisor, you work closely with your clients to craft investment strategies tailored to their objectives and risk profiles, and then monitor them over time. That very well may be the easy part of your client relationship. The more significant challenge you have as an advisor is to make sure your clients stay the course with their strategy even in the midst of a steep market correction.
One of the primary responsibilities of a financial advisor is to convey to their clients that the only concern they should have about a market downturn is not how deep it falls or how long it lasts, but how they react to it. After all, no one can predict when a market correction will occur, but we know that it will. After the longest bull market in history, clients tend to forget that stock prices can go down as well as up, and that market corrections are quite normal. That confers upon advisors the responsibility of educating their clients on the inevitability of market corrections and how they should react to them.
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Reasons Clients Need a Financial Advisor – Overcoming the Do-It-Yourself Objection
/ by Don Connelly / Investing Wisdom / 0 comments
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.
Read more