April 12th, 2022

3 crucial ways a financial planner can help your DIY investor clients in 2022

In your conversations with your clients, you may have come across an increased number who show an interest in investing.

According to Finder, in 2020, 33% of Brits said they owned stocks and shares – a 50% increase from 2018.

Your clients might be “DIY” investors, a term used to describe those who invest without taking professional guidance. Indeed, 61% of investors in a Capital survey said they make investment decisions based on online research, and a further 16% said they act on tips from social media.

While DIY investing can prove lucrative for some clients, working with a financial planner can provide them with valuable peace of mind, and help them to focus on their goals more clearly.

Now could be the perfect time to encourage your clients to seek investing guidance. Indeed, the market has proved volatile in the first quarter of 2022. As a result, some of your DIY investor clients could feel spooked, and may even make rash or under-researched decisions when the markets experience a downturn.

Read on to find out three crucial ways a financial planner can help your DIY investor clients in 2022.

1. A financial planner can review your client’s specific investment goals, and help them work towards them in a focused way

There is no “one size fits all” when it comes to your clients’ investments.

Their investment strategies are going to be personal to them, because their financial goals are unique too.

Let’s imagine you have two DIY investor clients, who began investing for totally different reasons.

One client has just begun investing, and plans to use any profits they make to help pay for their children’s education in the next couple of years.

The other, who has been trading online for some years, is set to retire in 30 years’ time. They plan to invest strategically over those decades in order to build up their later-life income.

These clients will have totally different attitudes to risk. The first client may prioritise cash savings and short-term bonds, for example, in order to minimise the risk of a market downturn reducing their returns in the next year or two.

Meanwhile, your retirement client may be able to take more risk, seeing as their goals are set for 30 years’ time, and they may have a better knowledge of how the market works.

Both these clients could benefit from working with a financial planner. Social media tips might have helped them get started, but this broad-stroke advice may not serve their specific investment goals in the long term.

By working with a planner, your DIY investor clients will receive a bespoke service that helps them focus on their life goals, and allows them to align their investments towards them.

2. A financial planner can help your clients diversify their portfolio

There is always risk involved in investing – this can’t be eliminated. Nevertheless, one way your clients could mitigate risk is by diversifying their portfolio.

Diversification can help clients lower what is referred to as “concentration risk”. If your clients’ investments are concentrated too heavily in one asset class or industry, this poses a risk to their wealth over time.

Often, DIY investors buy individual shares, making them vulnerable to concentration risk. If that company’s share prices fall, your clients’ portfolio will fall in value too.

If your client’s investments did significantly dip in value, this could lead them to feel stressed, and may even cause them to panic-sell their assets.

Unfortunately, panic-selling can make investors feel unequipped to re-invest. Research published by CNBC claims that of those who panic-sold their assets during a 2015 market downturn, 30% never returned to the stock market.

Working with a financial planner could help your clients manage investment risk through diversification strategies.

A successfully diversified portfolio might help them achieve valuable peace of mind, rather than worrying about short-term market fluctuations.

3. A planner can assist your clients with the rebalancing process

Just like diversification, rebalancing can be a highly beneficial move that DIY investors often miss out on.

Indeed, your clients may not be aware of the benefits of rebalancing, or how it could help manage investment risk in the long term.

Here’s an example of how rebalancing can help your clients maintain their desired level of risk.

Your client has an ideal asset allocation of 50% bonds and 50% stocks. Last month, the value of their stocks increased significantly, so now, their portfolio has a value distribution of 70% stocks and 30% bonds.

By selling a portion of their stock assets to rebalance their portfolio, your client could keep their investments at their desired level of risk.

What’s more, your client could have imbalances within their asset allocations.

For example, your client is investing equally in UK and US stocks. The US economy sees an uptick, so most of their portfolio’s value now lies in US stocks.

In response to this imbalance, your client might want to consider selling a portion of their US stock assets in order to rebalance their portfolio, and maintain their desired level of risk over time.

If they don’t, and the US economy takes a subsequent downturn, your client’s portfolio is at more risk of decreasing significantly in value.

In light of these examples, working with a planner can help your client evaluate their attitude to risk, and may empower them to rebalance their portfolio with confidence.

Your clients could feel supported, and gain the peace of mind that their portfolio has had a professional eye cast over it, particularly in the volatile market we are experiencing in 2022.

Get in touch

If your clients could benefit from investment support during this uncertain time, get in touch.

We can help them assess their attitude to risk, review their investment strategy, and could aid their progress as they strive to meet their financial goals.

Email enquiries@prosserknowles.co.uk or call 01562 829 222.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

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