Advisers believe investors’ emotional decision-making is costing them at least 2 per cent each year in foregone returns, Embark has found.
The Embark Investor Confidence Barometer found short-term market moves were worrying investors, with 61 per cent of surveyed advised clients having discussed market volatility with their adviser in the past 12 months.
Embark said the emotions felt during market corrections can lead some investors to make snap decisions.
It found this was a significant risk advisers needed to manage, with advisers reporting almost half (45 per cent) of their client base had strong opinions on investment allocations.
These decisions can lead to investment mistakes, with 63 percent of surveyed advisers saying they are ‘frequently’ or ‘regularly’ surprised by the decisions or proposals their clients make about investments.
By comparison, just 6 per cent said they were ‘rarely or ‘never’ surprised.
When asked what they thought was the biggest mistake their clients made in their investment decisions, advisers cited ‘being too influenced by the news’ (47 per cent) and ‘taking too little risk’ (44 per cent) most frequently.
Barry MacLennan, chief executive of 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”.
Embark said its survey showed the value advisers can bring to investors in guiding them through the emotions of investing.
Two thirds (64 per cent) of advised clients agreed their adviser helps them avoid emotional decision-making.
The Embark Investor Confidence Barometer is a twice-yearly survey of more than 1,500 people conducted by Censuswide for Embark Group.
amy.austin@ft.com
