Help me! I am worried about my investments and I can’t sleep at night.
After several calls I had put my client’s mind to rest which allowed him to sleep better because we had agreed a course of action which will result in a more suitable investment strategy.
I am used to dealing with clients who start off saying “Mr Burrows, I know exactly what I want to do”, only to change their minds later when they full appreciate the complexity of the options and decisions.
So, what makes clients so confident that they know what they want to do in the first place or they think they don’t need financial advice?
The answer lies with behavioural biases. We may think we can make rational decisions but in reality, we are often irrational because we are influenced by a number of behavioural biases such as:
• Loss aversion – Fear about short term losses may result in over cautious decisions
This means that advisers must find techniques to help their clients and the wider public overcome their inbuilt misconceptions and prejudices.
I have developed many techniques for helping people overcome their behavioural biases and these have proved invaluable in helping people make the most suitable decisions for their circumstances.
I have discussed some of these issues in a recent publication; ‘Retirement advice: an art or a science’. As the title suggests, good advice is much more than providing technical solutions. It involves taking into account of a whole range of emotional and behavioural factors.
You don’t have to be a psychologist to be an adviser, but a good understanding of behavioural finance certainly does help.