Re-engage clients with intelligent investing, says Russell
Emotional investing is driving retail investors to flip-flop between strategies based on greed and fear, rather than stick to long-term strategic investment plans, according to the director for client investment strategies at Russell Investments, Scott Fletcher.
He said financial advisers needed to foster intelligent investing among retail clients, based on the objectives discussed in the discovery meeting.
"No one really asks if I'm on track to the actual outcomes that I discussed with you in my discovery meeting and that you set my portfolio up for," Fletcher said.
He said investors pay advisers for a level of certainty, but market volatility was leading to frustration and emotional decision-making.
"The question becomes how to re-engage with the clients in the investment discussion and how to foster the client's commitment to a strategic investment plan because it's so easy in times of uncertainty for them to abandon them completely," Fletcher said.
He said often advisers' business models drove outcomes, rather than the client's objectives, whereas the adviser needed to match objectives and risk profiles prior to portfolio construction to avoid losing clients down the track.
When product drove investment decisions, he said, strategy was too often forgotten.
"When strategy is secondary, it's easy for that backdoor, in terms of client interaction, to start rotating because they're here today, gone tomorrow, flip-flopping all over the place," Fletcher said.
Outcome selection should be determined based on the client's investment complexity and the financial adviser's level of involvement, he said.
Fletcher said low complexity, low involvement clients could be outsourced while core and satellite approaches would suit the middle ground.
"You can set up almost [like] buttons in a matrix where you can have particular outcomes, and under those particular outcomes you have a model portfolio of funds, ETFs and so on," he said.
Recommended for you
Insignia Financial has reached a major milestone in completing the separation of MLC Wealth from NAB, having acquired the firm back in 2021.
There could be changes ahead for how ASIC requires licensees to handle conflicts of interest as the corporate regulator announces it will be meeting key stakeholders next year to update guidance.
Proper recordkeeping has been described as the “mortar between the bricks” of the advice process and critical to an FSCP decision as an adviser is suspended for failures in this area.
As investors increasingly seek to embed ESG considerations in their portfolios, a specialist adviser has offered tips for financial planners who may feel overwhelmed in tackling these complex topics with clients.
