How are investors coping differently in a market crisis such as the current pandemic, according to the Standard Chartered Bank’s Investor Personality Study?
At the onset of the market crisis, we’ve observed different personalities of investors. Those who are seasoned investors were able to keep their composure and stay focused on their long-term objectives, while many others panicked as the value of their portfolio declined. These varying reactions from investors required different types of support from their relationship managers and wealth advisers. Our team kept close to our investors by providing regular updates on market events and implications for investors; communicating the daily market and house views; and reviewing their investment portfolio and recommending necessary portfolio rebalancing where appropriate. Throughout their investment experience, we worked with our clients to ensure they had appropriate investments solutions and diversified portfolios.
How does Standard Chartered Bank’s investment approach beat inherent cognitive biases?
Our global investment approach is backed with vigorous process from our Chief Investment Officer. Recommendations are explicitly tested against the standard types of cognitive bias such as herd mentality. Our investment committee mirrors the DNA of the bank, and is deliberately designed to be very diverse in terms of expertise, geographic experience and, more importantly, diversity of thoughts, as well as gender, race and nationality. This ensures that our collective ‘house views’ have been rigorously assessed from many different perspectives and that our D&I agenda is in motion.
In times of market crisis, investors behave differently and inherent cognitive biases are commonly observed, which often lead to illogical decisions. That’s why our role as wealth advisers is very critical.
In times of market crisis, investors behave differently and inherent cognitive biases are commonly observed, which often lead to illogical decisions. That’s why our role as wealth advisers is very critical and so as our investment approach. Before any investment decision is made, we conduct an investment and risk profile, which we call ‘Customer Investment Profile (CIP)’. The CIP will assess the client’s long-term objectives and risk tolerance, and accordingly we discuss investment alternatives that are appropriate to their specific needs. Our investment advisers work closely with the clients throughout their investment journey with the bank, ensuring required information and guidance is provided as the clients are making their investment decisions. To beat inherent cognitive biases and any other potential biases, we encourage clients to develop a disciplined approach through regular investing. With this strategy, clients will not need to time the market and will be able to smooth out the cost of investment over time. In addition, it allows clients to switch, redirect or rebalance their investments portfolios with the help of our investment advisers. We also believe in a strategy to include a balanced diversified risk exposure, allowing investors to quickly increase or reduce the risk of their allocation. This strategy will allow clients to make informed response to market conditions and a smarter way to adjust risk rather than herding towards the latest trends.
What is your advice to clients in terms of making objective decisions during periods of extreme market volatility such as the current one?
We advise clients not to panic, and more importantly not to make drastic decisions. In as much as our frontline team is keeping close to our clients, we are also encouraging our clients to work with their respective relationship manager and investment adviser, who will be able to provide them with relevant market information and help them review their portfolios in an objective, unemotional and unbiased manner. As a matter of fact, that’s one of the key differentiators an international bank like us would bring to the table. Our frontline staff are supported by top notch experts and specialists from the bank.