B Is for Behavioral Coaching: How Much Value Does Your Guidance Add?

Executive summary:

  • An advisor’s greatest contribution to an investor’s bottom line is their guidance through volatile markets.
  • On their own, investors are likely to succumb to common behavioral biases and act against their own best interests.
  • Advisors should feel confident in the value they provide and confident communicating that value.

Last year was a difficult one for investors. Not only did equities and fixed income both end the year lower, but they were also quite volatile throughout. It may have felt like the promise of diversification failed and it’s likely that many advisors fielded calls from investors wanting to flee the markets altogether and move to cash.

Our Value of an Advisor study, now in its 10th year, has consistently found that an advisor’s guidance is the biggest contributor to an investor’s bottom line. This year’s study once again confirms that investors who are guided by advisors benefit when markets are volatile. They are more likely to remain invested through thick and thin, and therefore don’t miss out when markets rebound after a decline – as they invariably do.

Without an advisor’s guidance, many investors struggle with the emotional impact of making decisions during times of fear or the unknown. Depending on the market environment, this fear or uncertainty may compel investors to sell at the bottom or buy at the top. Most advisors know far too well that investors don’t always do as they should. Instead, their behavior is sometimes directly opposed to what is in their own best interest.

That’s what makes behavioral coaching an integral part of our Value of an Advisor formula:

Active rebalancing of investment portfolios