COVER PROFILE Active or passive investing are tools in a toolkit that can address different needs and, in some instances, complement each other How should investors behave to gain more certainty? Avoid impulsiveness and buyers’ remorse, and don’t chase after the latest fad or success story. Once you commit to an investment, understand what you have invested in and allow enough time for your investment to deliver. How can you ensure that a financial adviser’s advice process is aligned with the outcomebased solutions you offer? This is a question with levels of grey. At best, we can influence advice by making sure financial advisers know what our products and funds entail, and we can empower them with tools. The greatest control we will have is with financial advisers who are most closely aligned with our business. Ultimately, the advice process happens in a closed room between the financial adviser and client. As a client, you need to listen carefully and apply a rationality test; does this make sense, is it realistic or just too good to be true (the ultimate walk-away question)? Our outcome-based solutions do, however, give the financial adviser the ability to choose funds that are more closely aligned to an investor’s needs. This in itself should ensure a closer alignment to the advice process. The importance of staying invested for the long run You mentioned the high probability of beating inflation over long periods. What can be done to direct clients’ attention to long-term rather than shortterm returns? Repeat the message, gain a client’s trust and be proactive and honest with good and bad news, opportunities and risks. Markets go up and down, and if there is too much focus on the short term, it becomes an emotional experience for clients, who will be overwhelmed by the noise. So, keep reinforcing the long term, and the successes attained. Stay invested, even if the market doesn’t seem to be offering the opportunities to deliver high inflationoutperforming returns. What are the main reasons that clients stop being invested? Apart from the practicalities of needing their money, it is often about losing trust and faith in the investment because their expectations are misaligned and the disappointment that naturally follows. In other words, irrational behavioural biases. How can technology be used to prevent clients from switching funds during a market correction? Sometimes just creating a pause for thought, allowing time for reflection and highlighting the consequence of your decision, can sway an investor. We can also use technology as a prewarning for irrational behaviour. We should communicate to clients during times when markets are tough. What responsibility do fund managers have to help clients behave better? They should be honest and create a clear context and expectation. To communicate on an ongoing basis what the client can expect, what has happened – good and bad – and what we are doing. Keep clients up to date with what is happening, and why. How can clients know how much volatility they are able to handle? We actually need to start by asking ourselves whether we are speaking a language clients understand. Volatility is a concept clients may battle to truly understand. We need to use a different language around risk and opportunity and how long clients can remain invested. Instead of talking about the investment horizon and what happens if there is a loss of capital, ask how much can a client bear to lose compared to the return he or she wants or needs. Everyone understands this and this will better align clients’ expectations, experience and portfolio returns. How important is financial literacy and investor education in managing client behaviour? It is crucial. If we cannot speak a common language, we cannot align our expectations. If we don’t understand each other, we'll end up disappointing each other. The role of a financial adviser in ensuring that clients achieve their goals How equipped is the average financial adviser to deliver a goalbased service to their clients? There are great financial advisers and some not so good ones, just like in any other field. We believe good financial advisers would already be focusing more on the needs and goals of their clients as part of providing a professional service and running a great practice. As such, we believe our 14 www.bluechipjournal.co.za
solutions are well aligned to best practice in the financial adviser space. What are the skills that a financial adviser needs to put together a financial plan based on desired outcomes? The most important requirement is to effectively communicate what our solutions entail and what a client can expect. We truly believe the greatest value financial advisers can add is the time spent in front of their clients, understanding their needs and coaching them on the journey to success. We need to help financial advisers who support us to understand that. By using and understanding our solutions, we help them to free up their admin time to create the ability to deepen and enrich their client contact time. What skills do financial advisers need to be able to help clients stay the course to achieve their outcomes? Great financial advisers need to be truly driven by a passion to help their clients, a willingness to engage and be available. This needs to complement the real technical and product skills to create a holistic experience for clients. The statistics of financial advisers who are able to help clients remain invested are worryingly low. What can Momentum do to support financial advisers with this challenge? The best we can do is to empower financial advisers with information, support them in understanding our solutions and create opportunities for them to access and speak to us often. We are investing significantly to support financial advisers through boosting the knowledge base of our call centres, having more support staff available, reviewing our IT platforms and apps, and refreshing our fund fact sheets to convey information we believe is meaningful for clients and their financial advisers. To what extent do financial advisers themselves act emotionally when dealing with clients? We are all emotional creatures. Being and acting emotionally is natural. We need to guard against emotions that result in actions that can affect us negatively. To really make this change, we need to help foster trust in the system through a common understanding and set expectations that focus on what is realistic in the medium to longer term. www.bluechipjournal.co.za 15
