I recently listened to Ensombl’s Investment Podcast #26 – Investing Experience During Volatility, which explores how financial advisers can help clients remain calm, confident and invested through uncertain markets. It struck me how closely this mirrors the experience of turbulence on a flight: just as pilots reassure passengers that bumps in the air are normal and part of the journey, financial advisers help investors navigate market ups and downs with steady guidance.
Aircraft passengers who have experienced severe turbulence know the feeling. Initial unease gives way to fear as the bumps get bigger. But then comes the calming voice from the cockpit, saying the rough patch was anticipated, the disruption will be temporary and, in the meantime, everyone should stay seated with belts fastened.
For most of us, we tend to never think about the pilot outside those times on a flight when we are comforted to hear that turbulence is just part of the price of flying long distances from one corner of the world to another. Pilots, after all, are trained to understand aerodynamics and how to navigate around rough spots.
This is akin to the comfort that clients find in financial advisors in volatile markets. No-one likes to see shares and bonds going down, but the bumps are easier to take under the care of a professional who has first set expectations for the journey, understands how markets work and has the tools to help clients reach their destinations safely.
While not even the most experienced pilot or advisor can make turbulence go away, they nevertheless can provide people in their care with the confidence to navigate periods of uncertainty and to make good long-term decisions, separate from fear.
In fact, the value of advice is never demonstrated so keenly as when clients are able to tell themselves: “This is tough right now, but I feel I’m going to be OK.” They feel like that because they watched the pre-flight safety demonstration, they know the plan for emergencies and they have complete confidence in the professional at the pointy end.
Advisors, like pilots, are able to do this because they understand that conditions can change, often without warning. They also know what they can and can’t control. In the case of financial advice, they can design a plan made for multiple contingencies and built around a highly diversified portfolio targeted at the long-term drivers of return. Finally, they know how to communicate the value of discipline in all environments.
So, a passenger in severe turbulence might wish for a parachute. Likewise, the investor during a tough market might just want to bail out. The value of the advisor at such times, as with the pilot, is to keep passengers/clients in their seats and to convince them to stick with the plan, which often can seem counter-intuitive.
All of this does not just require technical knowhow, but a sophisticated understanding of human communication. People at their most fearful and emotional tend to be immune to appeals to reason, so the first step is recognising how they feel. “Yes, it’s bumpy right now, but we built this turbulence into the plan, and it won’t last forever.”
Sometimes the plan needs to be adjusted. A pilot may take a longer route to navigate around turbulence. An advisor might use the opportunity to rebalance the portfolio and revisit the asset allocation, in consultation with the client.
Success in reaching an investment destination often comes down to the quality and comfort of the journey along the way. While the best financial advisors know that, it’s not widely appreciated how critical peace of mind is to good outcomes.
In Dimensional’s survey of almost 19,000 investors globally, we found that while clients will always appreciate good returns, it is peace of mind that they rate most highly when engaging and retaining a financial advisor.
By delivering a great client experience in conditions good and bad, the advisor builds trust and confidence with clients. This, in turn, helps the advisor build a successful business that generates greater referrals.
For more on the value of advice and to learn more about how Dimensional can help you, and your business visit here.
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