Last week we briefly outlined the first of our four-part model for creating value for our clients. This week, we want to discuss Behavioral Coaching and how this ties directly into our financial planning process. Our overarching objective, of course, is to help keep you on track towards your long term goals. There have been several studies over the past few years attempting to quantify advisor value. Among these, Vanguard produced a research paper in March 2014 titled “Putting a Value on Your Value”.  Vanguard concluded that the various modules of value total about 3% per year for the “average” client. More recently, work by Russell Investments produced an estimate of 3.75% per year. A summary chart of how Russell breaks out the value appears in the chart below. The largest component of value in both studies is Behavioral Coaching.

Behavioral Coaching is primarily concerned with helping you stay on plan and avoid reacting to financial market noise. That sounds simple enough but our human wiring does not equip us very well for this task. Emotions get in the way. We provide what we call “dispassionate discipline” to help clients avoid financial blunders.

Behavioral Coaching also involves assisting you with understanding tradeoffs between competing choices and the resulting consequences. Financial resources are always scarce and decisions to pursue one goal may mean that another goal will become less important. Our experience tells us that prioritization of goals and staying focused is immensely difficult without ongoing coaching.

Behavioral Coaching also is valuable in sorting our inherent behavioral and cognitive biases that often hamper financial progress. These biases, such as overconfidence and confirmation bias (placing too much weight on information that follows your beliefs), directly impact risk perception. Personal beliefs are very difficult to change, even in the face of contrary evidence. We tend to view things that conflict with our views rationally, and emotionally evaluate things that agree with us.

Accomplishing your most important long-term goals is not just creating a plausible path and plan, …it is keeping the plan alive. That’s the essence of Behavioral Coaching and why it is where we can add the most value. Ready for a real conversation?

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