Financial advisors serve as indispensable guides for investors navigating through periods of market volatility. They offer invaluable support by helping investors maintain focus on their long-term goals, gain perspective, devise personalized investment strategies, rebalance portfolios, foster discipline, and facilitate access to alternative investment options.
In essence, they play a role akin to consulting a doctor when facing health issues, emphasizing the importance of seeking expert advice when making significant financial decisions. Just as self-diagnosis and self-medication can pose risks to one’s health, managing finances without professional guidance can jeopardize one’s financial well-being.
During turbulent markets, such as those witnessed during the Covid-19 pandemic, the role of financial advisors becomes even more pronounced. Here are 3 key functions I wish to focus on, which I believe they fulfill in assisting individuals manage their finances amid market volatility:
1. Portfolio Building Guidance: Financial advisors assist clients in constructing resilient long-term portfolios aligned with their financial objectives. This involves ensuring that the portfolio composition adequately reflects the client’s risk-return preferences and is well-diversified across various asset classes. Through comprehensive risk profiling, advisors assess the client’s capacity and willingness to tolerate investment risk, enabling them to recommend suitable investment options capable of delivering desired returns within the client’s risk tolerance framework.
2. Provision of Expert Knowledge and Information: In a dynamic investment landscape characterized by rapid fluctuations, staying abreast of market developments can be challenging for individual investors. Financial advisors play a crucial role in providing clients with relevant information on new and existing investment products, along with insights into their benefits and risks. This equips clients to make informed portfolio decisions, empowering them to navigate market volatility from a position of strength.
3. Emotional Support During Turbulent Times: Human biases often cloud decision-making, particularly during periods of market turbulence when heightened volatility triggers panic reactions. Financial advisors not only devise comprehensive investment strategies but also offer emotional support, encouraging clients to adhere to their predetermined asset allocation and portfolio strategies. They help mitigate the influence of emotional biases, guiding clients towards rational decision-making aimed at safeguarding their
investments amidst market fluctuations.
In focusing on these three pivotal roles, it becomes evident why engaging the services of financial advisors, particularly during turbulent market conditions, is essential. By leveraging their expertise and skills, investors can make informed investment decisions, secure in the knowledge that they have a trusted partner guiding them through both favorable and challenging market environments.
At AWM, our advisors are committed to remaining at the forefront of market trends and standing alongside our
clients through every phase of their investment journey, ensuring their financial goals are pursued with
diligence and expertise.
Written by: Simo Mlanjeni
Date: 15 April 2024
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