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What I can expect from a wealth advisor

According to a survey of 2,550 financial advisors in Europe, America, and Asia commissioned by the French fund provider Natixis Global Asset Management (Natixis GAM), private investors have unrealistic and exaggerated expectations based on a lack of understanding of markets and financial instruments. Without this fundamental knowledge of the mechanics of capital markets and capitalism in general, new retail investors often have very naïve and irrational expectations. This creates major challenges for both the new retail investors and their financial advisors.

This survey found that private investors worldwide expect annual returns of 9.5%. However, even Warren Buffett, probably the most successful investor of all time, considers a return of 6-7% per year good. The financial advisors in this survey considered a 5% return to be good and achievable for their clients.

The financial advisor should talk to you about risks, returns, and the risk/return tradeoff. Financial advisors should be able to explain every product they offer, including their funds. Financial advisors will try to sell you their funds first, which is a bit of a dilemma. Financial advisors profit off the sale of their bank’s funds, so it is a bit shady who’s interest comes first, the customer’s or the bank’s. On the other hand, funds are made by fund managers, whose job it is to maximize the return at the lowest amount of risk, whose work must be paid for. So never expect the next hottest stock tip from your financial advisor.

A good financial advisor will explain that there are 3 major mindsets for new investors to overcome. One is an exaggerated expectation that will always end in disappointment. The second is an emotional decision made on the “Fear of Mission Out (FOMO)” or “Cutting One’s Losses” which are both doomed to end in losses. The third mindset for the new investor to overcome is the belief that the market can be beaten.

A good financial advisor, like a good doctor, will take the time to explain to you your situation and your options. A good financial advisor will get to know what is important to you regarding your financial situation. A good financial advisor will, most importantly, try to assess your tolerance and appetite for risk. A good financial advisor will communicate with you regularly and pay attention to your needs and need or lack thereof information.

Like your social network on yeekatee, your bank advisor should talk to you at eye level about managing money and risk. Like the advice from your network, the advice should calm your fears and stop you from making decisions based on fear and emotions.


Written by Therese Faessler, Founder of and SFTA Head of Financial Literacy

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