The value of advice - Behavioural Coaching
Behavioural coaching is a major component in how a financial planner adds value to your portfolio.
Last month’s topic was “How a Financial Planner adds value to a Portfolio?”, a major component being Behavioural coaching. The month before the topic was “The Value a Planner Adds to a Portfolio”.
This month the focus is on “What is Behavioural Coaching?”.
There are many long-term investment charts that show how portfolio values increase over time but even with this proof many investors react to short term market volatility which can often undermine attainment of long-term objectives.
Managing this reactionary behaviour is the definition of behavioural coaching.
Behavioural coaching is how a financial planner manages investor 'emotion' and 'reaction’ to market ‘noise' to ensure long term goals are achieved. A good example of this was the GFC. Planners often talked of the stress of having to explain the correct path under such extreme circumstances. In the end, though, those who played the long game have recovered well.
This form of control is hard to achieve when acting alone, it often requires teamwork and professional help.
Behavioural coaching centres on four issues:
- A financial plan is the anchor to all actions.
- Set clear expectations at the beginning.
- Managing the emotions that accompany periods of market volatility.
- Work together to ensure an effective planner / client relationship rather than simply reacting to markets.
Behavioural coaching may also involve assisting in areas such as budgeting to save money now to help attain goals later.
A planner, though, will struggle to help you achieve your goals if they aren't continually kept up to date with any changes in your life.
There are four components that you and your planner need to work on together. These are:
Goals
Without goals there can be no planning. However, goals must be realistic and for many investors this is itself difficult because of their starting age. The earlier a person has a financial plan then in most cases the better the outcomes.
Discipline
Market noise and emotion means decision making is difficult. It may even mean cuts now to help win in the end. Discipline is very hard to do on your own so help in this area is a major contributor to attaining long term goals.
Balance
This simply means not to put all your eggs in the one basket. Spreading the risk may mean the full extent of up swings aren't gained but it means that the full extent of down swings aren’t either. Balance means 'slow and steady' and we all know how that works out.
Cost
A planner needs to be able to show that they manage the costs in your portfolio, so they can be as low as possible. History shows that on average, lower costs means better performance.
This is the third in a series of articles is based on a 16-year study by Vanguard Investments Pty Ltd.
Peter Graham
BEc, MBA
PlannerWeb / AcctWeb
Latest Newsletters
Hot Issues
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
- The compounding benefits from reinvesting dividends
- Three things to consider when switching your super
- Oldest Buildings in the World.
- Illegal access nets $637 million
- Trustee decisions are at their own discretion: expert
- Regular reviews and safekeeping of documents vital: expert
- Latest stats back up research into SMSF longevity and returns: educator
- Investment and economic outlook, February 2024
- Planning financially for a career break
- Could your SMSF do with more diversification?
- Countries producing the most solar power by gigawatt hours
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- Quarterly reporting regime means communication now paramount: expert
- Plan now to take advantage of 5-year carry forward rule: expert
- Why investors are firmly focused on interest rates
- Super literacy low for cash-strapped
- Four timeless principles for investing success
- Investment and economic outlook, January 2024
- Wheat Production by Country
- Time to start planning for stage 3 tax cuts: technical manager
- Millions of Australians lose by leaving savings in default MySuper funds
- Vanguard economic and market outlook for 2024: A return to sound money
- An investment year of ups and downs
Article archive
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
October - December 2018 archive
- Ranking of the world's best: Taking it personally
- The value of advice - Behavioural Coaching
- Our Advent calendar for 2018
- Compliance, tax advice in strongest demand from SMSFs
- Stop!! Don't do a paper Budget, use our online budgeting tools instead.
- Franking credit policy to dent retirement savings by 15 per cent
- Information needed to be the BBQ expert.
- Hungry for income? Choose carefully.
- Retiree self-protection: A volatility-and-downturn 'bucket'
- How financial advice helps create wealth.
- Superannuation gender gap narrowing, research shows
- All the stats you need to see how Australia is going.
- Market downturns, like this one, are to be expected
- ATO claws back $850m in unpaid SG in FY 17-18
- ‘Hefty penalties’ with TRIS payment failures, SMSFs warned
- The global financial crisis: Behind us but far from over
- 'Huge' professional risk in SG delays, big four firm warns
- What a financial adviser can add to your portfolio's returns.
- ATO updates crypto guidance
- Reverse mortgages: Short-term gain, long-term pain
- ATO set sights on 27,000 funds in ongoing crackdown
- ATO zones in on hundreds of newly created reserves
- A dynamic approach to retiree spending and drawdowns
- Your investment freedom-maker