Behavioral Advisor Perspectives and Practices: Practical Planning Is Your Compass

The next several weeks are going to be challenging for advisors and investors. The reality of the scope and severity of the pandemic along with the associated economic and market damage will hit home raising fear levels to new highs. In these times, it will be hard not to overreact, panic or lose hope. Strong emotions and behavioral biases including, anchoring, loss aversion, cascading and availability bias can cloud our thinking and lead to poor decision making. Engaging in realistic and practical planning discussions along with relevant behavioral coaching can provide essential support during these challenging times. 

We have talked with our advisors and are working closely with them to mitigate potentially serious long-term damage by helping clients to avoid costly behavioral mistakes. In the current environment, planning discussions should focus on changes in the clients circumstances and their needs in the next 3 to 12 months.

• How are they, and the people they care about, holding up and handling the situation? Are there any particular concerns or needs they want to discuss?
• Address specific, known or potential, changes in circumstances in the next 12 months and how plans can be adjusted to prepare for them. Particularly liquidity and income needs.
• What are immediate liquidity needs for the next 90 days and how can they best be met?
• What are expected liquidity and income needs for the next 12 months and how can they best be met? Can any outlays be delayed?
• Conserve or raise cash up to 15% of the overall portfolio to provide a temporary cushion.
• Make portfolio and investment changes in the context of specific needs, plan adjustments and long-term goals.
• Remember that smart decisions made now can protect valuable resources that can grow to meet long-term goals when markets recover.
• Remind clients that while this moment is difficult, it will pass with time and won’t always feel like this.
• Putting a flag in the ground and having concrete and actionable plans can reduce stress and provide a valuable compass that can be revisited and revised as needed.