Regardless of how well we think we’ve trained our clients, they will still make most of their decisions on emotion over logic. We suffer from this when we make decisions in other realms of our lives. However hopefully we show fewer biases with our money management and our skills in achieving financial success.
In this article I will be sharing my thoughts on the strengths that elite advisers demonstrate which some clients may deem as weaknesses. As most mature money management and financial strategies are counter intuitive and against conventional wisdom. Modern media and access to ‘free’ information is maybe our biggest threat and our client’s most destructive influence. If you disagree with my list, write your own, it’s a good way of identifying where our strengths lie.
The sole purpose for my professional existence is to ensure my clients don’t blow themselves up. The world is full of financial landmines and we are our own worst enemies. We all know that clients are the biggest wealth destroyer of all and we don’t manage money (anymore) we manage people. However the client in front of us thinks we’re managing his/her money, when really the majority of my focus is in managing them. So let’s delve into the skills that may be seen as weaknesses.
1: Not reacting to current news.
You don’t need me to tell you that we are now bombarded with ‘news’, which I call Negative Events World Service. 24-hours news and sensationalist journalism are the enemy to financial success; never forget this. The media moves from one crisis to the next. We are never crisis-less. I know there’s a lot happening in the world. However companies will still be making things which people buy. Our clients mistakenly think we should be continually reacting to news and making decisions based on this. We know the truth (which is eternal) about managing money and clients, whereas the media just know news. Clients will mistake our lack of concern, with a lack of competency. Over time, 5 years+ they will start to see our wisdom and appreciate it.
2: Making very little changes with their portfolios.
We all know money is like a bar of soap, the more you touch it the less you have. Timing markets is a fool’s errand and predicting market swings is the preserve of the crazies. Misinformed clients emotionally may feel joy in an adviser continually tweaking their portfolio and what they’re invested in. The elite adviser knows the only sure indicators to long-term success (performance) are discipline and costs. Frequently picking outperformers in advance is impossible. Your lack of ‘action’ maybe perceived as a weakness but actually, it is one of your strengths.
3: Being ecstatic during periods of negative volatility.
If you’re a long-term investor, which means you have monthly automatic savings set up into the markets, you should have a smile from ear to ear during temporary (they are all temporary) market downturns. It could actually be argued this is the whole reason why you’ll be exposed to superior returns. It’s because you were disciplined during periods of low asset prices. The only item clients actively pay over the odds for are investment assets. They love sales in every other area of their lives yet they hate investment sales. The stock market offers, January sales, Easter sales, Black Friday, the lot. A tiny minority understand the impact of these. How many times has one of your clients said, ‘I’m loving the temporary market declines, I’m getting a lot more bang for my buck’.
4: Spending as little time as possible discussing investment performance.
We know lifetime financial success will be determined by behaviour and not making big financial mistakes — there are too many of those to list in this article. I aim to talk about investments for approximately 5% of my client planning meetings. As this is how much impact a ‘portfolio’ has on lifetime financial success. How much you save is far more important. What you want to achieve and when has more impact. Why would you want to spend any longer discussing the past and also something that is fundamentally out of our control? Some client’s will think that ‘investment performance’ is the main driver, so if you spend little time on this they may think this is a weakness. We are here to deliver uncomfortable truths and not comfortable lies. Performance chasing is like a patient going to see a doctor for more drugs. The doctor knows that the patient’s lifestyle is likely to have a far more profound effect on their health than the drugs that are prescribed. Rather than prescribe yet more drugs, the answer is exercise more, eat better, quit excess drinking and stop smoking, these are the route cause of the issues.
5: Always focusing on the future and spending little time worrying about now and the past.
We forget how skilled we are at thinking about the future (most people can’t process their future self). As I say to most of my clients, the 62-year-old sat in front of me is not my client. It’s the 92-year-old you’ll become in 30 years. I’m also not really bothered where they currently are, when we first meet. This is a snap shot of time; future planning is what I’m concerned about. They may perceive our lack of interest in their current position as concerning, when really it’s a mature skill.
6: Not having and immediate answer when asked a question.
Clients ask many questions, which is great as it shows they’re engaged. Some we can answer there and then, hopefully without boring them too much with the mess that is financial services. However some questions are too tough to answer on the fly, as they’re hyper complex. This can be expanded to all areas of life, you should be wary of someone who can answer any question without missing a beat. They’re either a genius or a fool, usually the latter. Intelligent people can often be heard saying ‘I don’t know, I’ll need to look into that’, I like to hear this as it shows humility. Those who least need help, seek it. Humble people often seek help, which is encouraging. Some clients however may think this exhibits a lack of knowledge, when in actual fact it’s to the contrary.
Financial Advice is a noble profession; it’s hyper complex, full of emotion and continually evolving. We have to manage our client’s behaviour and emotions.
If you do what your client tells you to do you are perpetuating bad behaviour and you have lost, no question. You need to stop giving your clients what they want and be ruthless in giving them what they need.
This may result in uncomfortable discussions, maybe even clients leaving you. However being professionally authentic is crucially important in reaching the top of this mighty profession. I still have a lot to learn and I certainly don’t have all the answers, however I am ruthlessly aware of the biases which accelerate bad behaviour, we all need to train our bias bells and be ready to address them once they go off.