Coaching Clients to Take Your Advice

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

We are introduced to financial and economic ideas through the lens of perfect rationality. We, our clients, the markets, and all their participants are portrayed as semi-robotic economic agents, acting and reacting based solely on numbers, trends, prices, and indicators. Rational actors don’t buy or sell based on gut feelings. They don’t experience fear, hope or exuberance – they only act based on the data.

As we know all too well, human beings are neither perfect nor consistently rational, especially when our hard-earned money is involved.

Sure, our brains know that the markets trend upward in the long run, but that academic understanding doesn’t help much when you’re watching your portfolio take a hit in real time. We know that speculative bubbles exist and that they pop eventually, but how can you ignore them when the news keeps showing stories of early adopters earning millions from a couple of well-timed trades?

As advisors, our time and training quiets our animal spirits to act sensibly in tough financial situations. We’ve spent years studying every aspect of this game. We’ve watched trends emerge and dissolve, markets rise and fall, and bubbles inflate and burst; and we’ve done it from a place of privileged, elevated detachment.

Our clients have not.