Broker Check

Keeping Clients Heads on Straight

| April 20, 2017
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We believe that advisors can play a critical role in their client’s investment success, and that their role as a behavioral coach can be an important contribution to that endgame. But, behavioral coaching is most effective in the moment if the clients have been mentally prepared in advance.

The below excerpt was taken from the article “The Behavioral Challenges of Investing: Grizzlies Frequent the Area,” originally published on April 4, 2017 on the Vanguard Blog for Advisors (

So how can we proactively coach clients?

The best time to proactively coach investors, and to help them mentally prepare for the investment challenges to come, is when you are building the client’s initial financial plan. In many ways, it’s the tool for proactive behavioral coaching. As well as ongoing counsel and guidance to make sure clients stay grounded. It’s very easy for clients to feel nervous and unsure about the investment landscape. This process has gotten even harder with twenty-four-hour news networks blaring negative information every hour of the day.

When we build the plan, we mentally prepare clients for:

Losses as well as gains. Losses are always mentally part of a client’s thought process. Most clients that walk through our doors already have some type of negative experience with investing. Whether it’s from a bad real estate investment, to a penny stock that the brother in law suggested. However, gains need to be prepared for as well. Gains give a false sense of confidence, and can mess with an allocation structure. Clients will instinctively want to allocate all monies to the one fund, the one that has been a rocket ship. While anything that under preforms even for a quarter should be eliminated. 


We also let clients know that something, at some point in the future, is going to make them question their investment strategy. While it may be a bear market and not a grizzly bear, scary times will certainly occur during the typical client’s investment journey. These emotional periods are often fueled by pundits promoting something “different.” We let clients know, in advance, that the pundits don’t know them, we do.  We built the financial plan specifically for you, considering your needs.

When the best thing to do is to do nothing:

 We let them know that their financial plan is adaptive to changes that would warrant a revision, such as changes in the headlines of the client’s life, or changes in the market’s headlines. More recently even changes in fiscal, and economic policies should be taken into account. A plan needs to be fluid and responsive to an ever-changing world.

Coach for tomorrow, today:

As beneficial as behavioral coaching can be, it’s most effective when it is applied proactively. When an event occurs, it allows us to say, “Remember, we anticipated that something would happen, and we agreed not to let market headlines affect our strategy.” Sounds simple, and it is, but it’s also effective. As with any coaching, it’s important our clients know we’re a team, shoulder to shoulder, and prepared no matter what. It may be the most important form of mental preparation we do for our clients.

Excerpts from Vanguard Blog for Advisors. Donald G. Bennyhoff is a senior investment strategist for Vanguard Investment Strategy Group. 


Securities offered through First Allied Securities, Inc., A Registered Broker/Dealer. Member FINRA/SIPC. Advisory services offered through First Allied Advisory Services, Inc. A Registered Investment Adviser. The information in this material is for informational purposes only and is not intended to be specific advice. Please speak with your financial advisor as it pertains to your specific situation.

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