<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=529113&amp;fmt=gif">
login-iconeXchange™   Schedule a Strategy Session

How You Can Increase Client Wealth (and your own) in 2014

By ClientWise | December 31, 2013

Want to increase the wealth of your clients in 2014? Want to increase your own wealth? For good measure, how about increasing the financial satisfaction of your clients? Yours too, in fact.

There’s a straightforward answer. It’s not simple, but it is uncomplicated and clear-cut. Exercise more financial self-control and discipline….for you and your clients.

The Benefits of Rules: More Wealth and Happiness
Most interestingly, this recent report clearly indicates that those who employ a high degree of investment discipline have on average 12% more wealth than those who do not use rules. Better yet, they also experience a 13% increase in financial satisfaction.

According to the principal author of the report, Dr. Greg B. Davies, head of Behavioral and Quantitative Finance for Barclays Wealth, all investors have a unique “financial composure.” There are two aspects to this: 1) Risk tolerance for the long term, and 2) the degree of anxiety that investors experience for the short term. As he points out, classical finance does a good job on identifying and controlling #1…but virtually ignores #2.

However, it is the latter factor that is most destructive to investment returns over the longer term. Many investors, even though they are very aware of their behaviors, can’t help themselves, i.e. they have a natural inclination to respond emotionally to the markets. The cost of lack of investment discipline is significant. Emotional trading can cost investors up to 20% in returns over a ten-year time period.


Gender Differences Also
The report also illuminates noticeable differences between female and male investors:

  • Women are more likely to want financial self-control strategies, and more likely to perceive them to be effective,
  • Women have a higher degree of self-awareness to their susceptibility to financial stressors,
  • Men are more likely to be financially over-confident…leading to bad behaviors like timing the market, high-frequency trading, etc.

Opportunities for Financial Advisors
The implications of this study are far-reaching, and readily pertinent to how financial advisors engage their clients. Financial advisors might craft the “perfect portfolio” for their clients, but this assumes that all investors are completely rational and able to ignore short-term market events. Astute financial advisors might offer significant value by helping understand their own emotional make-up, as well as helping design the self-control strategies that are fundamentally important to achieving good market returns.


Some important questions for financial advisors to consider:

  • What are your investment rules and strategies?
  • Do you apply this investment discipline consistently and across-the-board, for all clients and for yourself?
  • How do you communicate your investment self-control protocols to others? How could you improve on this?
  • What has 2013 taught you? How could you be even more reliably disciplined?


We trust this helps.


The 6 Step Client Acquisition Process

Topics: Investing

Leave a Comment