In managing sequence of returns risk, we may not be giving simple rebalancing nearly the credit it deserves to accomplish similar or better than more complex approaches.
A recent survey found "an alarming 60 percent of clients did not know or were unable to answer if they were on track to meet their defined goals". Can yours?
Perhaps the most crucial change in our retirement planning language is simply to rename "retirement".
It is given that we all are wired to act foolishly sometimes, so how can we be better "choice architects" and "decision reassurers" for ourselves and our clients?
Individuals are vulnerable to economic and financial risks as they approach and enter retirement. Insights from behavioural finance can be used to enhance risk communication and retirement outcomes.
Formal reports redolent with data and analysis fail to communicate risks as people actually feel them. Reports need to be replaced by rapports, by engaged conversations.
We need to relate to investors in such a way that they can once again know and trust that financial security is a fact, not a feeling.
The constant challenge is to keep clients focused on their wealth goal when they are distracted by the many other factors that influence their perception of risk.
To improve client outcomes, financial practitioners must master six basic response skills.
Belief and philosophy when it comes to investing are not enough. Without culture and rigour, it is highly unlikely an investor will maintain their beliefs in all market conditions and cycles.
A common belief amongst financial practitioners is that investors and clients understand the investment objective. But are our investment beliefs a reflection of reality or investment myths?
Needleman said, "Money has a way to bring reality to situations". If so, the challenge is to have more scientific clarity helping to expose what money (and therefore investing) represents in a client's world.
Finology is the emerging (and converging) research field covering the study of minds, customs and behaviours with respect to money. It incorporates behavioural finance, and much, much more.
If we're explaining a "norm" to clients that embeds a social proof, we should be using norms that show what is successful, not describing the commonality of failure!