Behavioural Coaching

Behavioural coaching is a major component in how a financial planner adds value to your portfolio.

Last month’s topic was “How a Financial Planner adds value to a Portfolio?”, a major component being Behavioural coaching. The month before the topic was “The Value a Planner Adds to a Portfolio”.
This month the focus is on “What is Behavioural Coaching?”.
There are many long-term investment charts that show how portfolio values increase over time but even with this proof many investors react to short term market volatility which can often undermine attainment of long-term objectives.
Managing this reactionary behaviour is the definition of behavioural coaching.
Behavioural coaching is how a financial planner manages investor ’emotion’ and ‘reaction’ to market ‘noise’ to ensure long term goals are achieved. A good example of this was the GFC. Planners often talked of the stress of having to explain the correct path under such extreme circumstances. In the end, though, those who played the long game have recovered well.
This form of control is hard to achieve when acting alone, it often requires teamwork and professional help.
Behavioural coaching centres on four issues:
1. A financial plan is the anchor to all actions.
2. Set clear expectations at the beginning.
3. Managing the emotions that accompany periods of market volatility.
4. Work together to ensure an effective planner / client relationship rather than simply reacting to markets.
Behavioural coaching may also involve assisting in areas such as budgeting to save money now to help attain goals later.
A planner, though, will struggle to help you achieve your goals if they aren’t continually kept up to date with any changes in your life.
There are four components that you and your planner need to work on together. These are:
Goals
Without goals there can be no planning. However, goals must be realistic and for many investors this is itself difficult because of their starting age. The earlier a person has a financial plan then in most cases the better the outcomes.
Discipline
Market noise and emotion means decision making is difficult. It may even mean cuts now to help win in the end. Discipline is very hard to do on your own so help in this area is a major contributor to attaining long term goals.
Balance
This simply means not to put all your eggs in the one basket. Spreading the risk may mean the full extent of up swings aren’t gained but it means that the full extent of down swings aren’t either. Balance means ‘slow and steady’ and we all know how that works out.
Cost
A planner needs to be able to show that they manage the costs in your portfolio, so they can be as low as possible. History shows that on average, lower costs means better performance.
 
This series of articles is based on a 16-year study by Vanguard Invesments Pty Ltd.
Peter Graham
PlannerWeb / AcctWeb

More Articles

Most Spoken Languages in the World

Check out the Most Spoken Languages in the...

Read full article

SMSF assets reach record levels amid share market rally

How SMSF trustees are investing their retirement savings. . Over 1.1 million Australians are now...

Read full article

Income-free areas set to increase from 1 July

People nearing retirement often want to know how much they can earn before it affects their pension, and now...

Read full article

Many Australians have a fear of running out

Longevity risk is a growing concern for many working Australians as well as retirees. . The fear of...

Read full article

LRBA interest rates increase for 2025

The safe harbour interest rate for related party limited recourse borrowing has changed for...

Read full article

How to get into the retirement comfort zone

A third of Australians retire without a plan. Here's why you should have one. . Working and generating a...

Read full article

Compliance focus impacts wind-ups

The ATO’s strategic increased focus on compliance is having a noticeable effect on the sector and is now the...

Read full article

NALE bill passed by parliament

The bill that will introduce changes to the non-arm’s-length expenditure (NALE) provisions has passed...

Read full article

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

Financial Services Guide - Disclaimer & Privacy Policy

^