Emotional decision-making is costing investors money, findings from the Embark Investor Confidence Barometer show.
Short-term market moves are worrying investors, with nearly two thirds (61%) of advised clients reporting that they had discussed market volatility with their adviser in the last 12 months.
Embark said the emotions felt during market corrections can lead some investors to make snap decisions, with advisers stating that almost half (45%) of their client base have strong opinions on investment allocations. However, these decisions can lead to frequent investment mistakes, with 63% of advisers saying they are ‘frequently’ or ‘regularly’ surprised by the decisions or proposals their clients make about investments.
Nearly half of advisers (47%) said clients’ biggest mistake was being too influenced by the news, while 44% cited taking too little risk.
According to the Barometer, these emotional decisions have cost clients at least 2% per year in returns and 48% of advisers believe their average client has lost out on between 4-5%.
However, 64% of clients agreed that their adviser helps them avoid emotional decision-making.
Barry MacLennan, chief executive office at Embark Investments, said: “These survey results reveal the critical role that advisers play in providing ‘after sales’ guidance to investment recommendations so that clients don’t get blown off course by market dips.
“Once an investment course has been set, a critical and ongoing part of the adviser’s role is mentoring the client through volatile times to build deeper resilience to corrections and regularly re-focusing them on the long term outcome and not the path of short-term returns.”
