The Asset Allocator: Dalbar's Louis Harvey On What Drives Investors To Lose Money (Podcast)

by: SA For FAs
Summary

Investment consultancy Dalbar’s latest research suggests that it is a mistake for advisors to assume that investors have a static risk tolerance.

The firm’s president Louis Harvey says it changes constantly – on the basis of both market conditions and the client’s constantly shifting personal status.

The firm’s analysis of equity flows demonstrates clearly that market conditions prompt clients to buy and sell stocks – at the wrong times.

Harvey suggests defining investor goals in simple understandable terms (e.g., “house fund”) and designating separate pools of funds for each investor goal.

Listen on the go! Subscribe to the SA for FAs podcast on Apple Podcasts, Google Podcasts and Spotify (click the highlighted links).

Investment consultancy Dalbar’s latest research suggests that it is a mistake for advisors to assume that investors have a static risk tolerance. To the contrary, it changes constantly – on the basis of both market conditions and the client’s constantly shifting personal status.

In this podcast interview (14:07), Dalbar’s Louis Harvey suggests that advisors need to constantly assess and re-assess their clients' risk tolerance, and engage in behavioral coaching accompanying a tolerable asset allocation.