I recently had dinner with another couple and the topical subject of COVID-19 came up. They proceeded to tell me that they had a recent review with their Financial Adviser and that their IFA had predicted that the markets would be back up to pre COVID-19 levels by the end of the year and then the IFA cautioned this by saying that if there were a “second wave” of infection levels then this might not happen……..
I was then asked for my opinion or shall we say prediction and at this point had to steady myself by putting down my knife & fork. I calmly responded by stating that I wouldn’t be able to predict what the markets would do by the end of the year, neither did I know who shot JFK or what the lottery numbers would be for the Wednesday draw.
I also evidenced my response by referencing the market reactions to Brexit, Donald Trump’s Presidency election and of course the incredible market recovery since March of this year whereby analysts and “experts” were of course expecting downturns in these particular scenarios.
Since this conversation I have reflected quite heavily and have asked myself if my clients are looking for predictions or best guesses on what their investments will do and to be perfectly honest, I am rarely, if ever, asked these types of questions and I wonder why? It can only be answered with two possible options, either I am incredibly lucky in that the various different types of clients I have do not ever find this topic interesting or perhaps we are doing a good job regarding a key part of sound financial advice which is education. My clients will regularly hear me referencing the “truth about money”, my detailed explanations regarding our investment management process and most importantly – talking about the level of investment risk we need to take rather than simply thinking we are doing a good job by getting a higher investment return than was actually needed.
Predictions are a dangerous game so let’s just control the factors that we can which is understanding a client’s aims and objectives, agreeing a suitable term and then making an investment recommendation that takes the least amount of required investment risk – not the most.
