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Why Behavioral Coaching Can Help Increase Your Portfolio

by Robert W. Tull | June 22, 2020 | Financial Planning

Welcome to Financial Fridays. I’m Robin Tull with Tull Financial Group and I’m trying to share some financial planning principles that I’ve learned over the past 35 years. What caught my attention this week was a Wall Street Journal article and they were sharing a story of a Doctor who was 62 years old, preparing to retire in a couple years and what he had done when this pandemic came out and they were shutting down businesses and countries, he sold out his portfolio. Why that article caught my attention was because recently had another situation of someone in their 50s who came in and they too had sold out during that same period of February and March. It reminded me of some data that Fidelity Investments came out with and it showed numerous people had sold out of the market during this period of time. Over one third of 65-year-olds had also sold out their entire portfolios.

Having some perspective of the past 35 years, I was reminded of significant events like 911 and the Great Recession of 2008 and what I learned was – you may be able to get out at an opportune time, but it’s very difficult to know when to get back in. Vanguard provided a study, which we’ve made available in this posting, where they showed the behavioral coaching benefit of engaging a Financial Advisor. From a performance standpoint their study showed up to 150 basis points and it showed a one and a half percent additional benefit from engaging a financial advisor. This is because they can simply walk you through it, like we do many times, and simply say “Hey, tell me how much you’re going to spend over the next one to two years and let’s set this money aside in a cash position so that you won’t have to interrupt the investments during some type of a market correction.”

So that’s what a financial advisor can do and that’s what we encourage. A Financial Advisor can also help with tax planning, estate planning conversations, and college planning too, but just that behavioral coaching is important to help you know what you need to do when some type of significant event like a COVID-19 occurs.

I trust this information is helpful, please feel free to give us a shout or leave us a comment with other topics you’d like us to cover. Have a great day.