Any financial adviser worth his salt has ‘behaviour coach’ included in his job description.
It's inherently needed because for the most part due the fact us Humans aren’t hard-wired for successful investing. Why? Because we have evolved from a time when danger was near to run, quite literally, for our lives. So when stock markets are falling, for example, our brains are programmed to run. In other words sell. Or vice versa. 1000’s of years ago this was logical, as fleeing hopefully kept the lion, tiger, or rival tribe from killing you with huge teeth or a huge f*ckoff spear / club.
These days the emotions (fear and elation) that inherently come with investing need to be managed, and this is best done with help a coach.
Why does Roger Federer, Nadal and Djokovic have a coach by the way? Is it because they are rubbish at tennis? No, it is because they are even better with a coach to point things out that maybe they can’t see, don’t want to see, or just provide support and guidance when it is needed most. Which is probably around championship point.
We make decisions based on emotion, and then use logic to rationalize them later. When it comes to investing, to make a decision based on emotion. E.g. markets are high and it feels great so I’m going to invest more, I am having a great time - until it falls and you discover you might just have invested at the top. When markets are low - I'm panicking, I cant handle this; but I'm going to wait to see if it rebounds; Oh Sh*t, I should of got out earlier it keeps dropping, I'm just going to get out now….then you sell; But market starts to rise – oh F*ck, I shouldn’t have sold; market rebounds, you wait as you think it will drop again, it rises more; now you are angry you didn’t get back in so you wait a bit longer in case it drops again…all of a sudden you have bought high and sold low. Again. Investors do it consistently. They self-harm. Always happens and always will as long as we are human. Which who knows might not be that much longer with the robots and AI coming over the horizon.
A good financial adviser delivers added value by helping his clients NOT make bad (potentially disastrous) financial decisions. Be it market-related, or just telling you not to buy that overpriced condo in Spain at the top of the market which would have lost £200,000 6 months after purchase, this is what good advisers do.
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