You May Be Paving the Road to Perdition

Photo by Tengyart on Unsplash

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

A study by Vanguard found that investors who placed the highest value on their relationship with their advisors attributed 40% of the incremental value to “emotional elements” like trust and personal connection.

The Vanguard study triggered these thoughts: What protocol do you follow to assist your clients during these difficult times? Is it supported by peer-reviewed evidence?

An anomaly

The Vanguard study reinforces the widely held view that providing emotional comfort and “keeping investors in their seats” is a critical part of your value. How you should do this is a subject that hasn’t been widely discussed, leaving it up to each advisor to follow whatever approach intuitively makes sense.

It’s anomalous that the same advisors who have an investment philosophy well-supported by academic evidence don’t adhere to similar standards when responding to concerns of their clients.

A flawed approach

The current bear market has unleashed a flood of articles and videos by advisors. Many of them seek to “explain” or “make sense” of what’s “going on.” They often provide extensive data to put the current situation in historical context. The assumption is this information will be comforting.

While well-intentioned, this variation of “don’t worry, be happy” can cause heightened anxiety.