Investment surveys can often tell us much about risk tolerance. We periodically send surveys out to our clients. We want to see which way the wind is blowing. So, part of this process is “licking our index finger and sticking it in the air.”
But another reason for sending investment surveys is also to remain compliant. We’re not mind-readers (yet). So we remind clients it is on them to keep us “up to speed’ when significant personal events take place. These events in their lives often lead to good discussions. We talk about whether the level of risk they are currently taking is appropriate.
On a side-note: often, newer clients want to discuss what (or how) the unfolding news events might impact their portfolio. We remind them it’s the changes in their lives – not the changes in the Dow Jones – that will have more significance. Changes in their lives can spur changes in the direction of their investments.
In other words, we try to stress to clients “the market will do its’ thing. Let’s do our thing.”
But there’s another wrinkle to investment surveys I’ve discovered over time. Many of the answers we get in response to questions about risk tend to shift according to what’s been happening lately in the market. If we have had a good few months in the market, a greater number of responses tend to lean toward “let’s be more aggressive” responses. And when we have had some turbulence in the market, we tend to see more “let’s be more conservative” responses.
Advisors reading this – do you see the same patterns?
At points in the past, we postponed sending investment surveys to folks when the market has been volatile in either direction up or down. We have found the results get skewed when the stock market is dominating the headlines. It’s hard to pick a “perfect” time to send investment surveys, but we try to avoid those times when markets are on the move.