Part 4 – The major benefit of ‘behavioural coaching’

 
One important part of a planner’s job, and what adds real value, is being able to keep their clients focused when times are bad.

       

 

Part 4 in the value of financial advice series. The benefits from ‘behavioural coaching*’ by a financial planner is best demonstrated when managing market volatility.

However, this task is often made harder by the media’s apparent need to report things in their worst light.

Negative, rather than positive, commentary always seems to be the norm and the finance industry has copped quite a lot in the past years. But do other professions receive similar treatment where a few bad apples are used to represent all involved? A quick look would indicate the answer is yes.

Take for example shearers, a mainstay of Australia’s culture and history. One online author feels that shearers are getting such a bad deal from commentators that she’s trying to show what the profession is really like. Too often commentators focus only on very negative fringe issues such as how dangerous shearing is to sheep and that there are too many shearers using drugs. It seems that respect is hard to earn but all too easy to lose.

Like shearers, and the rest of us for that matter, planners aren’t all angels but ‘the proof is in the pudding’. Shearers have proven time and again that they are invaluable to the Australian economy. Similarly, and as shown by a ‘Vanguard Investments Pty Ltd 16-year study’, planners, a profession constantly being questioned and undermined, add around 3% to a portfolio’s value over time. This is a very worthwhile benefit.

Some very good examples of the benefits of remaining focused come from the GFC itself. While tough at the time it proved that staying the course, even when common sense and commentators said otherwise, still led to good outcomes for many.

One example of is where investors in the US equity market with a broadly diversified portfolio of 50% stocks and 50% bonds who didn't hit the panic button, saw an average annual return of 7% from the pre-crisis market peak in 2007 through to June of this year.

Another example from the same period shows that those who remained solely with shares did over 35% better.

These figures are based on Vanguard calculations using data provided by FactSet, as at 29 June 2018.

Your financial future is too important to simply react and it’s your planner’s job to see this doesn’t happen in an unmanaged way. The point here is that a financial adviser is often the only person who is in the position to provide the guidance needed when times are volatile.

*The topic covered by Part 3 of this series of articles was ‘behavioural coaching’.

 

Peter Graham
BEc, MBA
PlannerWeb / AcctWeb

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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.

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