A few weeks ago I was walking my dog. He is a seven-year old British Lab (doesn’t bark with an accent). His name is Willis, as in “Whatcha talkin’ about Willis?” He is very good – he walks by my side and rarely pulls on the leash. He is unaffected by other dogs. Actually he is unaffected by much other than treats.
As we walked, a woman had a puppy on a leash coming towards us that was pulling hard. He was jumping towards us pulling hard on the leash. I could tell the owner was a bit embarrassed by the “out of control” display by her dog, especially in relation to my dog.
As we passed by each other she commented, “Wow, wouldn’t it be great to have a dog like yours.” I told her that one day she can.
What You Don’t See
We often think that life is what we see, what we personally experience. We seldom think about what else could have happened, or what happened to get to the event itself. Michael Kitces refers to this as the “iceberg illusion.” We see the success, not all the effort, pain and perseverance it took to get to that point.
In the book, The Slight Edge, (highly recommended), Jeff Olson nails it right on when it comes to success. He wrote, “Successful people do what unsuccessful people are not willing to do.” Boom. Drop the mic.
With respect to my dog, what the owner didn’t see was all the struggle we had when Willis was a puppy. He pulled and pulled and pulled. We had the breeder help us train him; that wasn’t enough. So we hired a professional trainer and got a specific collar to discourage his pulling. That helped. But many, many walks fighting Willis – with the collar and the tactics we learned – is what changed his behavior.
If any dog owner puts forth the time, money and effort to properly and consistently train their dog, the dog’s behavior will change. It may not be as great as another dog since other factors come into play, but it will likely improve significantly.
What’s This Got to Do With Investing?
Investors may get frustrated with the mental shortcuts and emotions that wreak havoc on their decision-making process. Perhaps they wish they could just be like “Susie” who has her stuff together and keeps her cool in uncertain or fearful situations.
They may attribute good investing DNA to Susie, but that is an unlikely scenario. What they didn’t see are the past experiences and lessons that made Susie who she is today. Most humans are hardwired to be bad investors. We are emotional and experience several cognitive biases and heuristics that can influence us to make costly financial decisions. We accept that and create the proper game plan (i.e. defenses) to help us make good decisions under uncertainty, stress and fear.
Cue the Behavioral Advisor
And this is where you come in. Most advisors will do nothing to help their client behaviorally. This may be because they lack discipline by taking on too much. Or they may attempt to do so, but not put much time and effort to ensure the advice/content is effective in influencing better decisions. Or they may just be lazy. This is an opportunity for you! Just because someone has the same information as you doesn’t mean they will benefit from it. It’s the proper and effective application of this knowledge that makes the difference.
Account reviews, portfolio reviews – whatever you call them, should always have some time dedicated to teaching correct investment perceptions and ensuring expectations are realistic. The actual review of performance is of least importance in the meeting. Understanding your client, reviewing their financial situation and engaging in effective behavioral coaching is the best use of your time and abilities. That is where your greatest value lies.