April 6, 2020 / 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
Helping Clients Understand the Normalcy of Market Corrections
September 7, 2020 / 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.
Read more
Reasons Clients Need a Financial Advisor – Overcoming the Do-It-Yourself Objection
April 6, 2020 / 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