How an adviser can rescue you from yourself

Having a good adviser makes sense not only for financial reasons but psychological ones as well. Advisers can’t tell you which investments are going to perform best from one year to the next. But they can help to give you peace of mind.  A video on the Bloomsbury Wealth YouTube Channel.

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Transcript: Robin Powell & Philip Courtenay/ Behavioural finance expert.

RP: Having a good adviser makes sense not only for financial reasons but psychological ones as well. Advisers can’t tell you which investments are going to perform best from one year to the next. But they can help to give you peace of mind.

PC: In terms of where they can add value, I think there’s the objective element, tax.  Investing, the amount of risk people can take knowing how much they need to invest or not invest. Sometimes people have very real considerations on their mind, you know, will I have to sell my house in five years and downsize? Something that’s very meaningful to them. That’s the question you want an advisor to be answering for you.  Yes, they might come up with some tax saving opportunities and some things that you should be doing to be more financially efficient, but ultimately, the real value is that question that’s been on your mind, that’s stopped you from sleeping for the last couple of years, you know, that’s weighed on you, that they can help you answer.

RP: Research has shown that many people are persuaded to trade stocks by the promise of commission-free trading. But how these sites make their money is complicated, and, in reality, trading is very rarely free.

PC: Behavioural finance tells us we have blind spots. I have blind spots, you have blind spots, anyone watching this has blind spots.  You and I could sit there quite rationally, read something, think, I know exactly what I’m doing, but sometimes emotions get in the way. We’re influenced by things that are unconscious to us, we’re not even aware of.  So we might think, I’m on top of things here, you know, I’m reading the right things, I’m listening to the right people.  That doesn’t stop humans from being fallible to an extent. So having somebody to be able to have that conversation, discuss ideas and talk things through, even for somebody that’s well versed, financially sophisticated is still valuable.

RP: Most investors know they shouldn’t let their emotions get the better of them.  But all of us are prone to what psychologists call a hot state, when, in the heat of the moment, we stop thinking rationally.

PC: We can have the best plans in the world when we’re in a cold state, when we’re distant from the decision that’s there to be made. As soon as markets drop we know from, from the media narrative, from, from analysis of social media, people panic.  The first thing they do, they, they have anxiety, there’s, there’s fear, there’s denial, there’s, there are lots of these emotions that drive behaviour. And that comes about at times we’re not expecting and at times when we need to be able to deal with that behaviour the most and we’re least able to do so. A good financial advisor will keep their clients on track. They’ll say, okay, why are we making that decision there? Oh, you want to take your money out because we’re concerned about the latest bubble or you want to invest in the latest crypto currency or new fad that’s come up? A good financial adviser will have that conversation and unpick that a little bit and try and understand why and keep you on track from potentially making those costly mistakes.

RP: In summary, behavioural coaching can be very valuable. Even if you don’t think you need it now, you might need it one day. and it could stop you doing something you would regret for many years.

Disclaimer — The information in this video does not constitute advice or a recommendation, and you should not make any investment decisions on the basis of it. If you do however require advice please do not hesitate to contact Bloomsbury Wealth.