Please find below our Investment Market Update as at 9th June 2020.
Blue Sky Investment Market Update
A thank you from Blue Sky
I’m going to start off by congratulating all our clients at Blue Sky for their resilience during this financial crisis. It’s been a very challenging time in so many ways and keeping the faith around any monies invested has not been easy. I’m sure your resolve has been tested on a number of occasions but a big thank you to everyone for keeping your nerve.
Hopefully, our regular communications have helped enormously in terms of giving a perspective and delivering doses of positivity amongst the gloom. Dare I say it, what has transpired is pretty much what we were anticipating market wise, despite all the twists and turns of this virus.
I’m not going to comment today on what we expect moving forward, but instead I would like to take stock of what we’ve been through by saying that all our model portfolios that embrace a balanced approach, are now in positive territory over the last 6 months. In other words, anyone investing money six months ago into this risk approach, would have seen their underlying investments perform positively. Quite unbelievable when we think back to the carnage on the stock market around the 23rd March 2020!
Things aren’t always what they seem!
I think every one of us must have been anxious about our money at some point in the last three months. The cause of such anxieties will have depended on a number of biases which in turn would likely influence our behaviours and decision making. This is why we were very keen to increase our communications around the markets, to twice a week, in the hope of giving much needed perspective. There are different types of biases at play with all of us and these can hugely influence our responses, particularly in times of crisis.
As many of you know, I have always been very interested in behavioural psychology when investing. There has been much comment around ‘herd mentality behaviour’ of late and of course this is nothing new to us because this is what drives stock markets. However, how we react to the variances in markets depends upon a number of factors.
We always ask clients to complete a Risk Questionnaire as part of our onboarding and review process but this is just one of the tools we use to establish how comfortable clients are with a given risk strategy. Of course, we only tend to know what risk really means when we are in the midst of a crisis. There is a well-worn phrase in the financial sector “clients feel the pain more than the gain”. In other words, a down-turn in the markets is when our attitudes to risk are really tested.
It would be perfectly reasonable for a client to be bullish during times of optimism and score highly in terms of their risk score. However, when their job is on the line, stock markets have tumbled and their health could be at risk, it’s no surprise that their risk score could be somewhat different.
So, at Blue Sky we have expanded our thinking to better understand our clients and dive in to understanding risks in a deeper and more meaningful way. We are embedding a program into our proposition which helps both clients and ourselves better understand the range of emotional responses that a crisis may engender.
Down with the kids!
We have undertaken a pilot with just 25 clients to see whether this will be of value. Some participants were very tech savvy and others… well, let’s just say they lacked confidence when it came to matters technology! Yet in most cases, they surprised themselves and one couple said “wow, we are down with the kids” after they nailed completing the App, despite their initial misgivings.
Basically, clients were invited to complete a number of financial ‘games’ via an App in a fun and engaging way and the results were shared with us at Blue Sky. The aim is for us to better understand your innate views on a range of risks and biases. The ultimate focus being to better understand how you may be feeling and as a result, tailor our communications in a way which helps deliver confidence and perspective. Having a deeper understanding and empathy means we will be able to tailor certain communications for you.
Is this a gimmick?
At the outset, this was a reaction from some of the Blue Sky team. But they know that delivering a service which aids personal growth, self- awareness and improves financial well-being is central to our ethos at Blue Sky. The App will help us achieve this. The results from clients using the App will also feed directly into our Financial Planning offering. If we are planning for the future and want our modelling to be realistic, a greater self-awareness and a deeper understanding of behaviours in crucial situations, can enhance or harm one’s ultimate aspirations.
As Marie Curie said “now is a time to understand more and fear less”.
Hopefully this is what our weekly updates have achieved.
When will this be introduced?
We believe this App to be the first of its kind and we are excited about the possibilities. The developers have naturally had some teething problems and hence why we offered to introduce this to just a small sample of clients. Thank you to those who took part.
The aim is to use this technology to help create a greater emotional connection between risk/reward and the advice given – to bridge the gap between assumptions and reality. To be able to engage you, the investor, in a more empathic way, ultimately manifesting in a more dynamic, collaborative relationship – the results will be powerful indeed.
A timely offering and one we will be slowly introducing to Blue Sky over the next year.
You’ll soon be down with the kids!
Best wishes
Gary and the Investment Team
Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.