With MiFID II and the General Data Protection Regulation upon us, the RDR can feel like a distant memory. Yet it continues to have a lasting impact on advice firms.
Many firms had to, and are still in the process of, fundamentally changing what it is they do for a living.
Advisers can find themselves struggling with the idea of 'moving on' in terms of their business and what this means in practice. Emotion is a key factor here.
We know behavioural investing and emotion plays a big role in investment strategy and success. For advisers, by simply looking at an investment decision logically on the basis of good information and by keeping a client’s future requirements front of mind, this will lead you to make a suitable recommendation. Clients are helped by advisers who can remove emotion from the equation. Yet when investors are left alone to make their own investment decisions, seemingly lower risk investors can make high risk decisions when it comes to buying in to or selling out of their portfolio.
The same applies for business planning. Removing the emotion out of decisions and looking at each aspect as if it were someone else’s business can help.
At Investor Profile, we’ve seen and work with many firms that want to grow. The problem is their growth is being held back by having too many ‘smaller’ clients. But it’s not the clients themselves that are holding the business back, it’s the fact the firm is holding on to them.
The practicalities of going from the company you created from nothing to the bigger company you dream of running can be a wrench, and make you feel uncomfortable. There will, of course, be emotions and lots of positive memories associated with those smaller clients that helped to get you where you are today. But is that reason enough to stand still?
We try and make the case to firms that letting go of smaller clients and concentrating on your ideal clients, that is, those who are most profitable, can be the logical thing to do. It’s only really emotion that’s getting in the way.
Your business is your biggest investment. The question you may want to start asking yourself is, knowing what you do about investor psychology, and emotional biases in decision making, what would you tell your entrepreneurial self is the right thing to do in order to move your company forward?Read our profile interview with Jaskarn Pawar: How one financial planner is helping to plug the advice gap