Voices Look for ways to introduce simplicity to clients – Financial Planning

“The simpler it is, the better I like it.” – Peter Lynch, renowned investor and fund manager.

The volume of investment options available is daunting, even for a professional investor.

Add to that the many different strategies used and all the media coverage about markets going up and down, giving the impression that to succeed, clients must know when to buy and when to sell. The result is enormous complexity.

As an advisor, consider two different ways to approach this complexity.

One approach is to explain to clients that because investing is so complex, they must trust the advisor, who as a professional with great resources and experience can navigate the stormy seas on their behalf. Let’s call that the “leap of faith” approach.

The other way is to look for opportunities to introduce simplicity.

The concept that is most valuable is aligning investments with needs and thinking with investments. If the need is long term, then the investments are long term and the thinking should likewise be long term.

Simplicity can also be introduced with simple analogies or real-life experiences such as, “Think of your long-term investments like a plane flight. There is likely to be some turbulence along the way, and if you are nervous, look at the attendants. If they don’t look worried, and they have been on hundreds of flights, chances are you are pretty safe.”

Here is another real-life experience: During the 2008 financial crisis, an investor suggested selling all his stock holdings.

I said, “So, you are going to be a trader, then? When are you going to buy back into stocks?”

He said, “When things look better.”

I said, “Traders must buy low and sell high.”

The great value in simplicity is that clients can personally identify with their investment approaches and not just their advisors. That means that when there is market adversity, they are more likely to stay the course.

This story is part of a 30-30 series on navigating the growing world of choices for client portfolios.

Mike Kaiser

Mike Kaiser

Mike Kaiser is senior portfolio manager and co-founder of Samara Capital in Portland, Oregon.

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