While the world of investing is always on the move, whether fueled by changes in global mood, geopolitical events or the onset of new technology, there are still some set-in-stone rules to live by when working as a Financial Planner. Granted, there are few, if any, guarantees in finance, but by following these guidelines – a blend of practical, emotional and social pledges – it’ll be easier to keep focused, responsible and successful. So, let us lead you through seven die-hard dos and don’ts when it comes to investing.
1 – Don’t Get Emotional
Whether you make big losses or surprise gains, always try to keep emotion to a minimum. Not just applicable to overwhelmed Apprentice candidates who buckle in the boardroom, keeping a cool head means that whatever goes on behind the scenes is also built to last. But while the same could be said for many professions, the difficulties are doubled for Financial Planners, whose recommendations need to be approved by their clients before they can reach the results stage – and clients can be full of concerns. Bryan Olson and Mark Riepe, experts in the field of behavioural finance, put it best when they wrote that – ‘Every recommendation must pass through the client’s thicket of emotions,’  which can sometimes involve complicated situations, whether personal or professional. So, whatever the stakes when discussing decisions or results with your clients, keep a poker face, and always emphasise long-term strategy over short-term bursts.
2 – Do Embrace Technology
It’s clear to see that the industry is going through exciting times when it comes to technology, with the manpower behind carefully calculated recommendations making way for the data-crunching capabilities of artificial intelligence and machine learning. And while it’s a brave – if slightly scary – new world out there, the proof of its success is undeniable, with leading technology platforms now investing billions for their clients in markets which are now analysed and mined by algorithms to produce superior results. Also on the rise is the new ‘fintech’ sector, which marries financial products together with technology, making investing as easily done as an online shop. And from a practical point of view, the costs of implementing AI are also falling, a clear indicator that its testing grounds of hedge funds and megabanks have given the green light to its long-term functionality. So, turn to technology to show your clients that your long-term commitment to their portfolio extends to keeping pace with the new way of working. You don’t need a degree in geek-speak to understand the basic premise and the assurances brought by the boundless potential artificial intelligence are sure to assuage any client concerns.
3 – Don’t Buy Into Fear
Science has shown that we only have four basic emotions – happiness, sadness, anger and fear. And out of them all, fear is traditionally the trickiest one to master, triggering as it does our primal fight-flight system. But when screaming media headlines are ramping up disasters, whether natural or national or warning against collapsing markets, take heart from rational thinking and proven facts, because the aftermath is rarely as bad as the event itself. One of the most infamous and tragic examples, September 11th, 2001, saw financial institutions crashing – literally – to the ground, as terrorists plunged planes into the very heart of New York’s financial district. But the time it took the markets to recover was just 47 days, according to a study from Fidelity Investments Canada. While events such as those are mercifully rare, the principle can be scaled down to suit any size business dilemma, so remember – whatever happens, don’t panic.
4 – Do Learn Your ABCs
No advice on investment would be complete without the words of legendary investment guru, Warren Buffet, who bought shares in Berkshire Hathaway for just $7.50 in 1962; 55 years later, they were worth almost 40,000 times their original value, a staggering $298,710 – each. While he’s known for his super-rationality when it comes to the markets, he’s also savvy enough to know that arrogance, bureaucracy and complacency are equally dangerous to investing, citing them as ‘corporate cancers,’  in his 2014 annual letter to shareholders. Echoing advice from the FCA, Buffet’s words advise investors against getting too comfortable, and thus avoid conflict of interests, lazy advice and poor procedures.
5 – Don’t Beat Yourself Up Over Mistakes
Keeping a close eye on your compliance and due diligence requirements will ensure the authorities are kept happy, but with everything else, there is room for error. And again, the unique privileges and pain of being a Financial Planner come to the fore; as Olson and Riepe state profoundly in their work on behaviour finance, investment professionals are most likely to suffer regret due to the nature of their work – ‘The world of investment advice is fruitful ground for generating regret,’ they say, citing both the personal and professional shame that a failed decision can produce. But Warren Buffet backs up the need to buck up and seek the positives – even in failure. ‘Agonising over errors is a mistake,’ he said in 2001, ‘but acknowledging and analysing them can be useful.’
6 – Do Treat Your Clients As Individuals.
From your CIP to your client communication, you’ll already know that tailoring your business to suit is the best way to go, but even more than that, research has shown that every single person will fall into a specific ‘behavioural finance,’ category that determines their drivers, their fears and their investment preferences. In his book, ‘Behavioural Finance and Wealth Management,’ Michael M Pompian details the different investor profiles, highlighting the pros and cons of each along the way. From the passive-investor type, the ‘Preserver,’ who feels losses more keenly than they’ll feel gains, to the more bullish ‘Accumulators,’ who are happier to play in deeper waters but struggle to form a consistent strategy, it will pay your business rich dividends to know which type your client is.
7 – Don’t Forget The Details
From heavy-hitting legislation such as MiFID II or the revised General Data Protection Regulation (GDPR) that lands in May, to basic good practice such as creating your CIP, due diligence and compliance will always remain the cornerstone of good business. Not only are the professional penalties appropriately steep for stepping out of line, but good practice across the industry boosts consumer confidence, which underscores that the importance of adhering to the small print benefits everyone.