I believe financial advisors can add the most value to their clients in the areas of financial and life planning, and not as much in the investment management area. I also understand that you can't forget about the investment side.
In today's conversation, we discuss how to improve your investment performance by overcoming some of the behavioral investing mistakes that are so easy for all of us to make.
My guest is Dr. Daniel Crosby. Daniel is a psychologist, a behavioral investing expert, a bestselling author, and president of Nocturne Capital.
Checkout Daniel's new book, The Laws of Wealth: Psychology and the secret to investing success.
Daniel Crosby: I pay a financial advisor to help keep me from making all the stupid decisions I talk to other people about.
Various studies have suggested behavioral coaching is one area where financial advisors can help their clients get better investor returns. Ironically, Daniel quoted Burton Malkiel's A Random Walk Down Wall Street book that showed mutual fund managers were prone to all the same behavioral investing biases that the average retail investor has and that mutual fund managers tended to manage risk all wrong--i.e., they buy high and sell low just like everyone else. Daniel went on to say he didn't think there's any reason to suppose that financial professionals are any better at this for their own accounts than anyone else.
This is a paradox because if financial advisors are prone to the same behavioral investing mistakes in their own accounts, how can they all of a sudden give good behavioral investing coaching advice to their clients? Daniel answers that--and much more--in today's podcast.