A recent survey noted the differing views held by advisors and clients regarding performance. While advisors take a longer term view of performance and tend to benchmark performance against achieving client goals, clients measure performance on much shorter term criteria. One year returns, volatility, and absolute returns were the focus of 41% to 54% of clients. Fifty-three percent of advisors focused on long term goal achievement.
Advisors also have a brighter view of markets going forward. The 2008 crisis did so much damage to portfolios that investors are still reeling almost four years later. Clients are also concerned about short term volatility, government policies, and global events. Such discrepancies
between client and advisor views adequately reflect the experiences of each side in the client-advisor relationship.
Advisors who study behavioral finance will find many common biases in these views. People remember painful experiences much more readily than positive ones. They base decisions on those painful experiences. They also become selective in the information they use to make decisions. Advisors may have an opportunity here to educate clients on these biases and to view investment performance more objectively.
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