Why a BFA?

You may notice at the end of our business cards a three-letter designation, BFA. While we greatly appreciate jazz and modernist painters in our office, it certainly does not refer to a ‘bachelor of fine arts.’

Instead, it refers to the fact that our advisors have attained the ‘Behavioral Financial Advisor’ designation. When there are financial planning designations like the CFP and CFA – both more common and certainly more technically focused designations – why did we focus on something called the BFA?

We firmly believe that the lessons, knowledge and insights gained through the correct application of behavioral coaching is the single biggest reason for investing success or failure. 

And there isn’t even a close second.

Vanguard backs us up. In their annual Advisors Alpha Study, they contend that advisors can add about 3% net of fees to a client’s portfolio. So, you would assume that naturally most of that 3% would be from the advanced technical knowledge, the constant study of the markets or some ability to predict better than most the financial future better than our competitors.

Nope. Half of that 3% value a ‘good advisor’ can add to your portfolio comes simply from behavioral coaching.

Let me illustrate behavioral coaching at its most elemental. We all know that ‘buy low and sell high’ is the investing maxim that is frequently said and obviously the most important. However, most investors do the exact opposite. A yearly study by Dalbar Inc. proves that while the stock market does about 8% most years, investors actually do something closer to 5%. Simply stated, the investor should not even have to buy low and sell high. They just need to ‘buy and hold.’

No market timing. No picking of hot stocks. Just invest and stay the course. Boring advice, but tough to follow. That’s where we come in.

Not following that advice is costly. As you can see below, the ‘behavior gap’ as we call it can cost thousands of dollars and more importantly – years off of your retirement.  (Click image to enlarge)

 

So, what is behavioral coaching and why is it important? 

The study of Behavioral Finance integrates three disciplines: Traditional Finance (Modern Portfolio Theory), Neuroscience, and Psychology. We help clients to focus and interpret the role that any emotional ‘hang-ups’ can play in how decisions are made when it comes to their investing and financial future. Furthermore, it takes that complex understanding and uses it to offer ways to follow a rational way of thinking guided by personal values, goals and expectations.

We can do this by helping our clients discover and understand their core values and the way in which their own minds, biases, and fears influence their investment decisions. We then craft a plan and portfolio that takes the emotion out of it. Everyone wants to buy low and sell high? We want you to do that as well! But doing so on a consistent basis takes mental discipline and an ability to stay the course.

This personalized approach adds something that a simple spreadsheet cannot show. We utilize tools like Risklazye, where we establish not only your risk tolerance but your loss tolerance. Many investors know how much they want to ‘gain’ in investing. However, doing so requires an amount of perseverance. Simply put, there is no gain without pain in investing. Have you considered how much ‘pain’ (market volatility) you are willing to take and still stay the course (buy and hold).

As Kenny Rogers says, “You have to know when to hold ’em and know when to fold ‘em.” Having a BFA in your corner is a helpful ally in the process of making that decision.

BFA is definitely not the stuff or quarterly earnings reports, Morningstar ratings, tax laws or prospectus research. Of course, we do all that as well. But we know that ‘stuff’ is secondary to putting a decision-making plan I place.

After all, that what’s matters most. Just ask Vanguard.

“The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.”

 

Securities offered through Securities America, Inc. Member FINRA/SIPC. Check the background of your financial professional at FINRA's BrokerCheck. Advisory services offered through Securities America Advisors, Inc. Mission Point Planning and Retirement, and the Securities America Companies are unaffiliated.
Securities America and its representatives, Mission Point Planning and Retirement do not provide tax or estate planning advice. These services are provided in conjunction with a qualified tax and/or estate planning professional.
This site is published for residents of the United States, is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed."


The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on the following objective criteria: Credentialed as an investment advisory representative (IAR) or a registered investment adviser; Actively employed as a credentialed professional in the financial services industry for a minimum of five years; Favorable regulatory and complain history review; Fulfilled their firm review based on internal firm standards; Accepting new clients; One-year client retention rate; Five-year client retention rate; Non-institutionalized discretionary and/or non-discretionary client assets administered; Number of client households served; Educational and professional designations. Wealth managers do not pay a fee to be considered of awarded.


* Source: Pew Research Center
† Source: “Quantitative Analysis of Investor Behavior, 2014” Dalbar Inc. Most recent data available. An index is un-managed and one cannot invest directly into an index.

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