The Joy Of Being Wrong And The Danger Of Desirability Bias

“No one enjoys being wrong,” Daniel Kahneman told Adam Grant, who recounted their conversation during a recent interview, “but I do enjoy having been wrong, because it means I am now less wrong than I was before.”

Grant describes Kahneman, the psychologist seen as the originator of and greatest contributor to the field of behavioral economics, as “a living legend,” a lofty label that Grant himself is sure to earn any day now. So when these two sages, known for having gotten so much right, talk about their enjoyment in having been wrong, it provides a special comfort to those of us who find ourselves acknowledging our errors more often.

Being wrong sucks.

First, I love that they admit to their humanity—not just that they are occasionally wrong, but that it kinda sucks when the realization initially strikes. Helpful humbling is often initiated through a little hurting. And one of the best ways to salve that sting is to recognize the benefits to be gained from being more right into the future.

One of the biggest humblings of my career was also one of my most important lessons. I grew up professionally in financial firms that believed the primary justification for their existence was picking the right stocks, bonds and mutual funds at the right times for their clients. I genuinely believed this was the best use of our time and energy, until I was exposed to the evidence—that the vast majority of stock pickers don’t actually beat their benchmarks long-term and that allocating and reallocating active funds likely only increases the costs investors are virtually guaranteed to incur in pursuit of “alpha” that’s very difficult to sustain over the long-term!

Upset guy realizes he made a mistake
Whoops!GETTY

Wealth Managers: The 3 Keys To An Elevated Client Experience

What you’ve done in the past isn’t enough for the future. That which has differentiated you enough to become successful thus far in your career likely isn’t sufficient to set you apart and perpetuate your success going forward.

At one point, pushing product for a recognizable company gave you an edge. Then, being an asset manager turned some heads. Evidence-based investing gave you an even better story to tell. Offering comprehensive advice as a Certified Financial Planner™ practitioner was once novel, and full-time fiduciary status made you a more evolved advisor.

But now some recognizable names are offering a version of the above for less than you pay for your streaming television subscriptions, all while one of the most recognizable names in finance just announced the end of a sales practice for which it is legendary. The net result is that there will only be more—and lesser priced—competition for financial advisory services. What, then, will it take to continue to set you apart?

A comparison of how experience goes beyond service
Experience Over ServiceBUCKINGHAM STRATEGIC WEALTH

Parents Of College-Bound Kids: Don’t Eat The Guilt Sandwich

The ivory tower of higher ed, the U.S. government, the financial industry, the bumper sticker barrage, a healthy pinch of pride, and, yes, even our genuine love for our children have all converged to serve up a big fat guilt sandwich for parents of college-bound kids.

We’ve been made to think that we’re damned if we don’t, so we’ve done it—or overdone it, really. We’ve sacrificed our own financial futures for the sake of a supposedly priceless experience in the form of a college education.

Now, before you grab a pitchfork to chase me down from whatever perspective I might have offended, please know that I’m a thankful college graduate. What’s more, I enjoyed teaching at the college level for several years (and likely will again). I’m in the financial industry, I love my kids more than I can express, and I’m proud enough to have adorned my car with a bumper sticker pledging my support for their teams and/or academic institutions.

Perhaps most importantly, those kids I mentioned are 17 and 15—a high school junior and freshman—and, at the very moment this article is published, I am literally attending a college “prospect day” for my eldest at an institution of higher learning that resembles Hogwarts. In other words: I’m a believer in a college education, and I’m right there in the trenches with you.

Wizarding World of Harry Potter at Universal Studios Hollywood
HogwartsGETTY IMAGES

Investors Beware: You Can’t Get Outperformance Without Underperformance

Nobody minds market volatility when it’s in the upward direction. But this week, we got plenty of the type of volatility that we don’t like so much as investors, the kind that inspires headlines with words like “plunge” and that end with exclamation points.

It presents an opportunity, therefore, to remind ourselves of one of the central tenets of the art and science of investing:

You can’t get outperformance without underperformance.

Indeed, the only reason we have a right to expect a higher rate of return on any given investment is that we’re willing to endure greater risk, and, in all likelihood, higher volatility. But just how much volatility?

Let’s look at some of the scariest market moments of the past 50 years, specifically how far the market—in this case, the S&P 500—dropped over a handful of notable time periods:

Biggest Market Drawdowns of the Last 50 Years
Biggest Market Drawdowns of the Last 50 YearsTIM MAURER

Should I Take My Investment Gains Off The Table?

A friend called me the other day to ask a question that I know many share and that many financial advisors are hearing, especially from those who are currently in retirement. Here’s how the conversation went, along with a few notes specifically for financial advisors to help in the similar conversations you’re having with your clients:

Q: “Tim, my portfolio has done well enough in just the first quarter of the year that we’ve more than covered the income we need from our investments for the whole year. Should we just cash out and take our investment gains off the table?”

A: First, I understand how you feel. We’ve had so many years where gains were hard to come by and a few in which it felt like the bottom was going to fall out. It’s stressful, even in the best of times, so the temptation to take your winnings off of the table in a year where your income goals have already been met feels not only rational, but right.

And yes, you certainly could do exactly that.

Financial advisor note: Our clients are the hero of their story, we are only a guide. They are the boss, and we are the hired help. So in any circumstance, the client must feel free to exercise whatever instinct occurs, because they are literally in control. Furthermore,  we take an important step in any form of coaching by reminding the coachee of their autonomy. A client might be inclined to expect their advisor to put up a fight when they suggest they’re considering cashing out of their portfolio—and they’re probably right to anticipate as much—but recognizing the very freedom they already possess often frees them to make the decision we’d prefer.

taking chips off the table
Taking Chips Off The TableYURI SMITYUK/TASS

The Problem With Financial Literacy—And A Proposed Solution

The problem with financial literacy is that it gets off on the wrong foot. The very moniker is condescending, implying that those it serves are financially illiterate, that they have no idea whatsoever how to use money.

Thus, in addition to condescension, we must add inaccuracy to the list of financial literacy’s foibles, because having a lot of money certainly is no prerequisite – or guarantee, as it so happens – for understanding how it works. Even the poorest of the poor are embracing entrepreneurship through the advent of micro-finance to raise their standard of living from critical to stable. Even the 10-year-old kid buying a candy bar at the corner store is successfully completing a transaction. And even the 50-something who spends 110% of his annual income with the aid of a home equity line of credit may be demonstrating a more dangerous lack of money mastery than those generally labeled financially illiterate.

And besides, who among us is quick to embrace a solution that requires the admission of complete ignorance?

A person leads a finger on the lines in the book, but instead of letters only question marks on the page in the textbook
Financial IlliteracyGETTY

Financial Advisors: Decrease Distraction With A Personal Kanban System

For most financial advisors, no one ever sat down and told us, “Here’s how you should go about your day.” Too many of us started our careers being judged by one single metric—new revenue generation—and the only tools we were given were a booklet in which to write down the names of as many friends and family members as we could conjure and a phone. The rest was up to us.

Day one, everything we did (in life, not just work) was designed to generate new business, and everything else was sublimated to that aim, including servicing those new clients, learning how to better serve them, and actually managing the business of a financial advisory practice. As long as you subjected yourself to one meeting per week with a dude doing his impression of Alec Baldwin’s “Always Be Closing” speech, the rest was up to you.

If you were one of the fewer who entered the business through a less sales-oriented route, you were still likely inserted into a system driven by someone else’s once-manic approach to achieving the singular goal of new revenue generation. Then the ubiquity of email, shared calendars, instant messaging, smart phones, and social media sprayed lighter fluid on the dumpster fire that was most of our days.

Man at work with many distractions
The Hyperactive Hive MindGETTY

Maximize Your Productivity With “The Attention Capital Principle”

I understand the problem you face every day when you start working. You have an idea of how you’d like your day to go, and then you turn your computer on.

Your inbox was populated overnight by bleary-eyed inbox-zero adherents pounding away in a converted closet. A couple more hours have been consumed on your virtual calendar by well-intentioned colleagues scheduling important meetings. And then before you even manage to catch-up in your inbox, that not-so-friendly chime from Slack or Teams cues the symphony of distraction that is your day.

It’s a wonder we get anything done at work. And it’s no surprise that when we leave our desks, we often feel a hollow ring of having accomplished less than we’d hoped despite spending more time than we intended.

Woman frantically busy at work
Crazy BusyDEPOSIT PHOTOS

Effectively Navigating The In-Between Phases Of Life And Work

Sometimes we do get ourselves stuck, but other times we simply find ourselves marooned in the in-between—where the present feels more like the past, but the future is uncertain.

People talk a lot about finishing an existing project or starting a new one, but how can we effectively navigate the seeming wasteland between them? Whether or not we choose to be in this space, it can be uncomfortable and it is often unproductive. It’s as if we find ourselves treading water—personally, professionally and financially. But by effectively navigating these in-between phases in life and work, by releasing the outcome and exercising proactive patience, we can keep moving forward.

Maybe you’re rehabbing an injury and are out of the game or the season. Maybe you’ve sold your house and temporarily are crammed into an apartment while you’re building your new dream home. Maybe a long-term relationship has ended and you’re taking time to heal before considering coupling again. Heck, maybe you’ve gotten the first vaccine shot and are awaiting the second!

One of the most common—and challenging—in-between scenarios, however, is occupationally oriented. I spoke with a great friend and amazing professional this past week who runs her own business—but she’s in the middle of a lengthy interview process for a job that could be really stinking awesome.

The new job, if offered and accepted, would initiate a massive amount of change for her and her family. They’d have to move—and they already live in the best city in the world, for goodness’ sake—but her husband and three children are all on board for a new adventure if that’s how it breaks.

There are several meaningful pros to accompany that monumental con, though. Most notably, the job would vault her visibility within her industry, compounding her already impressive credentials, and position her as a national authority in her realm of expertise.

But the whole process of wrestling with this possibility began months ago. First, she had to come to grips with the possibility herself; then she had to communicate that development to her husband, whose work would remain in their current locale; then they had to see if the kids were on board; and only then did she really seriously consider this option.

And throughout it all, the “Will they pick me?” stress continued to build and build. The first interview. The call back. And now, a scheduled third interview. Oh, and running the business she already owns.

Most of us have been through some version of this and many other in-betweens—or we will be in the future. But as she recently brought me up to speed on the process and progress, I could feel my own stomach tighten. So I asked:

How are you managing being in the in-between?

Curiosity: The Most Important Trait For Financial Advisors

I had it all wrong.

Early in my career as a financial advisor, my goal, even more than gaining clients, was to gain knowledge. I was operating under the assumption that bringing knowledge where it is lacking is an advisor’s primary value. But while a certain degree of knowledge is a prerequisite, of course, I eventually learned that knowledge is ubiquitous—readily available with a few keyboard taps—and that it can even be counterproductive when sub-optimally applied.

Fortunately, I graduated from that oversimplistic belief to a more nuanced one in which I found greater confidence. I determined that sound judgement was actually the most important trait for an advisor. It was the ability to apply knowledge, to help clients make a this-or-that decision, that was really where an advisor could demonstrate his or her worth.