Humans aren’t wired to be successful investors, according to Omar Aguilar, SVP and CIO of passive equity and multi-asset strategies at Charles Schwab Investment Management.
In a July 21 webinar presented by the African American Financial Advisors Association and Schwab, Aguilar spoke to how behavioral finance impacts investors and their decisions.
“We all react differently,” Aguilar says, noting that the collective emotions of investors are what influence the markets.
The first half of 2020 was “unprecedented” for investors and advisors alike, he said. advisors always have a mix of clients, with some being more emotional than others, the Covid-19 crisis, combined with the stock market volatility it triggered, forced many advisors to act as therapists.
And advisors likely feel as though their clients’ expectations have changed this year, he added. Everything from our way of life to the way we communicate has transformed in the past six months, said Aguilar.
But there are steps advisors can take to help clients through, Aguilar says.
“Forget about that uncertainty for now,” he recommends. “Those are going to very hard to grasp. Concentrate on the things you can control.”
Reassess clients’ feelings about s Aguilar. “Work with your clients to figure out if it’s really the risk profile they want or if their investment objectives have changed,” he says.
Advisors can also control their approach to markets. Follow a systematic process “that allows you to stay invested over time and try not to go in and out of the market,” because “volatility can change on any given day.” Instead, “focus on the long run.”
Aguilar reminds advisors that as “cliché” as it is, they need commit to . “I’m pretty sure many are out of their strategic goals, with some of those especially that have international holdings, they’re probably lower than their original target. It’s a good time to think about over diversifying in areas that have not worked so far,” he told attendees.
By focusing on these areas, advisors can feel a better sense of control, according to Aguilar. The ongoing coronavirus pandemic, uncertainty in the economy and the 2020 election cycle is unlikely to offer any reprieve in coming months, he said. “It is going to continue to be an uncertain market.”
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