Behavioral Coaching Takes Off

Behavioral finance. What role do emotions play?

29 Jan Behavioral Coaching Takes Off

Investor Emotions - behavioral financeWith investing becoming more automated, where do advisors add value? Behavioral coaching, says Tim Buckley, Vanguard’s CEO. At Inside ETFs, Buckley reported: 58% of  an advisors job is susceptible to automation, and fees are likely to continue to decline.

In most areas consumers celebrate technological disruption, he said. “But it’s uncomfortable when it comes to us.” Three areas of traditional investment advice — rebalancing portfolios, ensuring tax efficiency and selecting low-cost investments — are easily automated.

The one part that resists automation, and the part that gives the biggest boost to investor returns, is behavioral coaching, Mr. Buckley said. While you can wear a device that reminds you to get more exercise, for example, you can’t get one that tells you not to lend money to your no-good brother-in-law.

Behavioral coaching

Perceptions vs behavior in investingInstead of reacting to investor biases once it’s too late to effect change, Toews Corp trains advisors how to take a pro-active approach in the way that they interact with and guide their clients. The goal is not just to curb investor biases, but also to help investors do the opposite of the crowd and take advantage of its poor decision-making abilities.

Advisors get insights from the “Investment Owners’ Manual” as part of the Behavioral Portfolio Design™ program. The manual gives advisors specific guidance to enable them to take what they learn in the workshops about investor tendencies and apply it to their practices, as well as feedback from advisors about the challenges and opportunities in integrating behavior finance in their practice.

Says Phil Toews:

I believe that advisors may be able to add real value to their practice and their client relationships by understanding and applying behavioral finance. By identifying client triggers and creating a path to try to mitigate the potential negative effects of these triggers with their clients, advisors can be proactive and calm when the markets are seemingly in chaos. After five years of consulting with over 400 advisors across the country, we have formalized our process, which we call Behavioral Portfolio Design™.

Related. See PR for Advisors

Mark Rose
mark@finsquared.com

Founder Finsquared, financial PR outside the box. Helping financial companies thrive through PR, content marketing, social, digital, lead gen.