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A state of uncertain uncertainty

So how do retail investors react in these conditions of uncertainty and what should you actually do?

Now we all know that the financial markets don’t like uncertainty; it makes them very jittery and that, in turn, causes high volatility which can cause investors to behave in different ways. My colleagues and I recently attended a Conference hosted by FEIFA (Federation of European Independent Financial Advisors) where we listened to a presentation by one of the world’s largest fund managers regarding investor behaviour. Using a research tool developed in conjunction with the University of Cambridge and with a sample size of over 2000 people they found nine types of behaviour biases.  I want to focus on the top 3:

• Projection Bias

• Present Bias

• Herdism

Projection Bias is defined as “the tendency to falsely project current feelings onto future events

Present Bias is defined as “the tendency to prefer immediate gains over larger future gains” 

Herdism is defined as “the tendency to do something because many other people do the same” 

Now think – how many people do you know that tried to cash in on the property boom here in Spain in the late 1990’s and early 2000’s looking to build a property portfolio for their future (Projection Bias and Herdism)? Then we have the collapse in the property market and people were left in an “asset rich but cash poor” position.

What happened next? Well, there were a lot of people who completely cashed in their pensions by transferring to a QROPS jurisdiction that allowed you to do so at an earlier age then in the UK (Herdism and Present Bias). And then what happened? They had cash in the bank, but a massive impact on their future income when they stopped working.

These are just two examples on how investor behaviour can be influenced by bias and the long-term impact of decisions that are made without careful planning and consideration.

What you need to do now:

Quite simply, come and talk to us.  By having a simple and relaxed but structured conversation over a cup of coffee we can:

• Clearly establish your current financial situation

• Discuss the reasons that you want or need to invest

• Explore your future plans and goals and not just take your stated needs at face value

• Ensure that your investment goals are consistent with your future income or estate planning needs

• Help you understand potential future returns in tangible terms in accordance to your attitude to risk

• Remind you that your needs are individual and may be different to other people

• But also benchmark your needs against similar people at later ages or life stages

Providing a suit of armour against “that man with the spade”

We can then prepare and present a solution that will ensure that your wealth is properly diversified and not reliant on a few sectors. There are lots of things happening in the world at the moment that are impacting the financial markets.  And the reality is I think that for the foreseeable future we are going to be in a constant state of change and hence volatility. So, once you become a client of Blacktower, through careful consultation and regular reviews we will continue to support you and monitor performance, adjusting your portfolio where necessary.

If you have any questions, or concerns then please do not hesitate to contact me on +34 952 816 443.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Other News

Spotlight On … Anita Pembery

Anita Pembery

Anita Pembery, Administrator

How / why did you get into your line of work in the financial services sector?

I knew the owners of Blacktower before I moved to Spain and was impressed with their long-term vision for expansion – also their sense of being a family business, no matter how big or small the company.

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Brits Urged to Take Up German Citizenship

German crowdExpatriate Brits living in Germany have been advised to look into the possibility of becoming German citizens, as, amongst other things, naturalisation is likely to make the practicalities of Germany wealth management more straightforward.

Expat group British in Germany has said that British people living in the country should act quickly as it will likely be harder to achieve citizenship if the UK leaves the EU on March 29 2019 without a deal. In the event a deal is reached, Brits will have until 31 December 2020 to apply for dual citizenship, according to Germany’s foreign ministry.

Effectively, this means that if Brits want to be able to ensure dual citizenship, they must act quickly as a no deal scenario could mean they have to renounce their British citizenship if they wish to become German citizens. The sooner Brits attend the Ausländerbehörde (Foreigners’ Registration Office) for advice the better their chances of securing a favourable outcome.

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