Financial Consultant: Artist or a Scientist?


As a financial consultant for the past 29 years, we have witnessed our fair share of challenging markets alongside our clients. Despite how unpleasant these times are, they are a normal part of market cycles. We have gone through the longest and one of the strongest historically bull market cycles since the Great Recession of 2008–2009. Given that the bond was at its weakest level since 1949, investors have understandably forgotten what a nasty stock market looked like.

Our recommendations are based on financial academics, but keeping in mind our clients' "financial baggage" is essential to assisting them in maintaining a proper long-term investment strategy. We characterise financial advice as impartial counsel given to clients that integrates their financial objectives and risk tolerance with the academic discipline of a well-structured portfolio. While this definition is simple to state, getting there requires both "art" and "science." Real-time monitoring of investment management is impossible. It is not entirely based on static, solved equations from the academic literature. Yes, the foundation of fundamental financial techniques is academic discipline. However, each investment cycle has unique market-affecting elements that are taken into account in the context of previous cycles with analogous asset class connections and correlations. Academic considerations must be kept in mind because these connections and correlations are prone to shifting and changing. The truth is that investment results are based on future outcome possibilities that are unknown at the moment but taken into account based on historical data, expectations, and precedent.

What do you advise your clients regarding the likelihood of current events and future events? You inform them and give them the facts. The truth is that nobody can predict what will happen or when. We interviewed asset managers and listened to investment strategists for decades of our career, the majority of them had very excellent credentials from elite firms. No one has a crystal ball, which is the overall conclusion of all that time invested. If they did, then a different company or individual would be highlighted on CNBC every day, or they would use their premonition to run their own portfolio from the beach. These viewpoints can readily be misconstrued for actual knowledge since the media must fill the airways and print copies. This perception, based on mountains of available information, has perpetuated a subliminal impression that someone, somewhere has the answer.

Being goal-oriented while dealing with expat clients is more crucial than concentrating exclusively on performance in relation to benchmark returns. It is more crucial to "do no harm" than to jeopardise one's financial situation. A financial plan is crucial in determining whether a client's financial goals are realistically attainable and, if not, what needs to be done to increase the likelihood that they will be able to maintain their chosen lifestyle. It contributes significantly to our understanding of various long-term expected investment returns and related risk profiles, as well as to our discussions about asset allocation with clients. According to research, the decision of how much of a portfolio should be invested in stocks, bonds, cash, and other techniques is what determines risk and reward. Considerations about which specific equities to purchase, for example, pale in comparison to this choice.

The foundation of the academic "science" of advising services is determining an appropriate asset allocation for a client that represents their long-term objectives and risk tolerance, and from there, what asset classes and investment strategies "belong" in a well-diversified portfolio. However, it is important to take the time to pay attention to, inquire about, and appreciate each client's unique response to risk, which we define as actual paper losses and the emotions they cause. A financial consultant can significantly impact a client's long-term financial performance if he can recognise and accept his client's emotions. Understanding our clients, talking with them, and teaching them are the human elements required to successfully guide them through harsh economic times and personally trying phases in their lives.

Our clients anticipate us to have a strong intellectual background, but they feel especially supported by our comprehension of who they are and what matters to them.

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