Tag Archives: financial advisor

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Financial Advisors: How To Talk To Clients About Politics

The last time I put a presidential campaign sign in my front yard was 2004. We lived on a small court, and we had just moved in that September. One of our neighbors was another young couple, but the other two families had lived there since the houses were built in 1960.

My political convictions were (and are) important to me, but one day, as I pulled into the court and saw the sign, it struck me that while it may have been a bridge to one neighbor, it could almost certainly be a stumbling block for another. I hadn’t even met all my neighbors in person yet—did I really want my vote to be the first impression I made?

I pulled out the sign, and I haven’t raised another since.

Politics sign
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Sometimes I have to pinch myself, because as a financial advisor, my job is to meet people, learn about what’s most important to them, help them articulate those values as intentions and goals, and then help create and follow a plan designed to reach them. What a gig, and what a privilege!

One of the greatest gifts of my 20 years and counting in the business is the wide variety of people with whom I’ve been able to engage. While you might tend to think that there is a stereotypical financial advisory client, my experience has been anything but uniform. From teaching college students—one of the best educations I’ve ever received—to advising individuals and families, it’s the striking differences between people that have left an indelible mark on me.

Sure, aside from the college students, they all had something in common—they were blessed with means sufficient enough to hire someone to help in its stewardship—but that’s where the similarities stopped. And their political proclivities have ranged across a vast continuum.

Especially over the last decade, and increasingly over the past four years, I’ve also seen these political opinions manifest as convictions so gripping that I’d describe them as visceral. People seem increasingly concerned with the potential for politics to shape their lives externally, and these concerns are so deeply internalized that I can see, hear and feel the weight of them in the faces and voices of my clients.

These feelings seem just as strong across the political spectrum. It’s not uncommon for us, as advisors, to have a conversation with someone who is convinced that their livelihood is doomed and the very fate of our nation sealed if so-and-so wins only to find, in the very next conversation, that another person is convinced of something equally cataclysmic if such-and-such wins.

So what are we advisors supposed to do? How do we navigate these intense emotions with our clients? And how should we navigate the opinions we hold, knowing that our convictions are rarely, if ever, going to be entirely aligned with those of our clients?

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Are You A Complainer, Consumer Or Contributor?

Are you a Complainer, Consumer or Contributor in the workplace? In Adam Grant’s book, Give and Take, he differentiates between three types of people–Givers, Matchers and Takers–categorizations that have implications in both our personal and professional lives.

But as an educator–and student–in the realm of financial advisory development, it struck me that Grant’s triumvirate may have an analogous trio of traits that accurately describes our posture toward learning how to be better professionals. (And people.)

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Complainers

I’m sure you’re not a Complainer, but I’ll bet you know how to spot one, whether that person is a friend, colleague or client. Complainers tend to have an eye for the imperfection in everything, and they almost seem to enjoy pointing it out. They seek to disagree and magnify their discontent. They capitalize on opportunities to provide criticism, but it’s rarely constructive. And they also tend to be vocal about it, creating dissatisfaction for others where it may not have previously existed.

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The Dumbest (Most Important) Thing I’ve Ever Done

Originally in MoneyThe most important event in my life is one of which I was long ashamed.

I was an 18-year-old punk with a monumental chip on my shoulder. You know, the kind of kid certain of his indestructability, sure of his immunity from the dangers of self-destructive behavior.

At 2:00 a.m. on a random Wednesday morning in June 1994, after a long day and night of double-ended candle-burning, I set out for home in my Plymouth Horizon. At the time, my car was bedecked with stickers loudly displaying the names of late-60s rock bands. No shoes, no seatbelt, no problem.

Not even halfway home, I was awakened by the sound of rumble strips, just in time to fully experience my car leaving the road and careening over an embankment. After rolling down the hill, the vehicle settled on its wheels and I, surprisingly, landed in the driver’s seat. But all was not well.

Broken glass. My right leg was visibly fractured. I had hit the passenger seat so hard that it was dislodged from its mooring. Blood dripped on my white T-shirt.

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You Can’t ‘Robo’ True Financial Advice

Originally published CNBCThe investing world is a better place, thanks to the advent of well-funded online investment advisory services.

Collectively dubbed “robo-advisors,” companies such as Betterment, Personal Capital and Wealthfront have managed in just a few years to do what the financial industry has failed to accomplish during a couple of centuries: provide quality investment guidance at a cost accessible to most demographics. It is a long time coming.

Adam Nash, Wealthfront’s chief executive, however, isn’t fond of the robo-advisor label.

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A Simple Tool for Getting Better Financial Advice

Originally in MoneyTrue story: Many years ago, I was meeting with a married couple for an initial data-gathering session. Halfway through the three-hour meeting — the first stage in developing a comprehensive financial plan — the husband excused himself for a bathroom break. As soon as the door shut, the wife turned to me and said, “I guess this is as good a time as any to let you know that I’m about to divorce him.”

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3 Reasons Financial Advisors Should Court Younger Clients

Originally published CNBCLast month I attended a presentation that explored, in depth, the notable differences and financial tendencies of several generations, from the silent generation through the millennials.

The presentation described certain representative traits perceived as common among each generation and what financial advisors should consider when communicating with members of them as prospects and clients.

When discussion of the younger generations came up, I noticed advisors around the room rolling their eyes and scratching their heads. The expert at the front of the room was providing well-researched data to help us understand what is important—and less so—to these generations and how we might consider breaking through to them. 

But, as the attention of this group of well-heeled advisors descended into a collective yawn, the presenter scurried to wrap up before answering the most important questions:

  • Why exactly should financial advisors dedicate themselves to working with younger clients?
  • Why should advisors apply valuable time and money to crafting services and messaging for a demographic niche notorious for inspiring descriptors such as “entitled,” “ungrateful” and “distrustful”?
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Here’s Why People Ignore 80% of What Their Advisor Tells Them

Originally in MoneyI’ve heard it estimated that out of all the financial and estate planning recommendations that advisers make, their clients ignore more than 80% of them. If there’s even a shred of truth in this stat, it represents a monumental failure of the financial advice industry.

To explain why, let me tell you a story about a financial planning client I worked with a few years back. In one of our first meetings, she and I were reviewing her three most recent tax returns. As I discussed them with her, it became clear that the accountant who had prepared those returns — an accountant who had been recommended to her by her father — had filled them out fraudulently. A bag of old clothes that she had donated to charity became, on her Schedule A, a $10,500 cash gift. She also deducted work expenses for which she had already been reimbursed.

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Financial Advisors: Differentiate Yourself By Being Yourself

The most freeing day of my career was when I sold my golf clubs.

Different

Although the transformation had been under way for several years, it was a moment of symbolic importance. It signaled an official decision to permit myself to be something other than what I had come to believe the financial industry wanted me to be. I was officially granting myself permission to be myself.

Conformity

I apologize in advance for stereotyping, but the sales managers I had worked for had personified the industry for me. Not fond of nuance or implication, they simply had expressed that I was to be, among other things, a golfer. So I bought a set of new clubs outfitted with a nice bag, and I hired an instructor to help me master the gentleman’s game.

After several lessons, my laidback instructor told me he’d never seen anyone grip the club quite so hard. We discovered that I had complemented my less-than-elite athleticism with heavy doses of intensity and hustle to remain competitive in sports while growing up. Unfortunately, as it turned out, these traits were counterproductive to success in golf.

Instead of investing thousands of dollars in psychotherapy to try and loosen my grip on a golf club, I sold my clubs and bought a used road bicycle. I grew to love the sport, which rewarded my overcompensation of will and desire.

But I wasn’t just dumping golf at that moment. I was dumping it all—the notion that I should only wear dark suits, plain white (or light blue on Friday) shirts, power ties, hair that is neither too long nor short and a clean shaven face. Eureka—I could even wear a pair of jeans to the grocery store now!

Differentiation

Paradoxically, as long as I lived inside of the industry’s box, I was taught to differentiate myself professionally—to become “the guy” for orthopedists or cosmetic dentists or corporate attorneys. Everything I did in life, work and play, was supposed to send a message that would presumably attract a specific niche of people who are known for making especially profitable financial advisory clients.

Of course, there is nothing wrong with golfing, differentiating yourself or serving a niche. In fact, each of these pursuits can be beneficial for you and your clients when practiced in earnest. What is wrong—or at least unhealthy and more than a touch manipulative—is becoming someone you are not for the benefit of purposefully differentiating or conforming.

What if the Holy Grail of finding your niche and setting yourself apart from the crowd was found simply in permitting yourself to be yourself?

Being Yourself

If you always wanted to be a Navy fighter pilot but got turned down because you’re too tall or your eyesight was worse than 20/20, you could develop a niche serving military officers. If you aspired to be a surgeon but threw up all over the cadaver on the second day of medical school, you could serve the medical community. And of course, if you’re passionate about golf and enjoy the simplicity of uncomplicated garb, you should be entirely free to live up to the stereotype of the financial advisor.

There’s only one caveat, but it’s a big one: When you give yourself the freedom to be exactly who you are, you might disappoint other people. It’s easier for companies and managers—even parents, spouses and, in some cases, kids—to put you in a predictable construct that may best serve their needs and wants.

What if you want to help social workers navigate the world of personal finance and thereby would likely have to take a pay cut? What if it means you’d be working with clients less and drawing more? What if becoming fully you means moving to Latin America to manage a micro-finance operation and teach English? What if it means educating advisors more than investors?  What if it means designing a practice that conforms to your family instead of the reverse?

You might have to change ZIP codes, companies or professions altogether.

Unfortunately, being who you are—especially in the financial industry—may not be the easiest thing to do, but choosing to be yourself is simple because it’s natural, and incredibly liberating.

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Study Reveals Investing Is Hazardous To Your Health

Investing Hazard-01I don’t need to inform you that investing is dangerous business.  You already know in your gut what Joseph Engelberg and Christopher Parsons at U.C. San Diego found in their new study, that there is a noticeable correlation between market gyrations and our mental and physical health.

But when do you think the financial industry will get the point?

Shortly after I became a financial advisor, I was given a book to commit to memory.  It told me what my role in life would be: To make a very good living helping approximately 250 families stay in the stock market.

The text insisted that regardless of my client’s age or risk temperament, it would be in their best interest to be—and stay—in stocks, exclusively and forevermore.  I was the doctor; they were the patients.  I was the ark-builder; they were the—you get the point.

The book might even be right.

But…

The Behavior Gap

My friend and New York Times contributor, Carl Richards, has been drawing a particular picture for years.  He’s struck by the research acknowledging the noticeable difference between investment rates of return and what investors actually make in the markets.  (Investors make materially less.)

Investors, it appears, allow emotions to drive their investing decisions.  A desire to make more money causes them to choose aggressive portfolios when times are good, but a gripping fear leads them to abandon the cause in down markets, missing the next upward cycle.

Investors buy high and sell low.

Well-meaning advisors, then, including the author of the book I referenced, have claimed their collective calling to be the buffer between their clients’ money and their emotions.  Unfortunately, it’s not working.

Maybe it’s because the intangible elements of life are so tightly woven into the tangible that we can’t optimally segregate them.

Maybe it’s because we’re not actually supposed to forcibly detach our emotions from our rational thought.

Maybe it’s because financial advisors and investing gurus should focus less on blowing the doors off the benchmark du jour and more on generating solid long-term gains from portfolios designed to be lived with.

Livable portfolios.

Portfolios designed to help clients stay in the game.

Portfolios designed to help clients (and advisors) avoid falling prey to the behavior gap.

Portfolios calibrated with a higher emphasis on capital preservation.

How much less money do you make, anyway, when you dial up a portfolio’s conservatism?

The Same Return With Less Risk

In his book, How to Think, Act, and Invest Like Warren Buffett, index-investing aficionado, Larry Swedroe, writes, “Instead of trying to increase returns without proportionally increasing risk, we can try to achieve the same return while lowering the risk of the portfolio.”

Using indexing data from 1975 to 2011, Swedroe begins with a standard 60/40 model—60% S&P 500 Index and 40% Five-Year Treasury Notes.  It has an annualized rate of return of 10.6% over that stretch and a standard deviation (a measurement of volatility—portfolio ups and downs.) of 10.8%.

Next, Swedroe begins stealing from the S&P 500 slice of the pie to diversify the portfolio with a bias toward small cap, value and international exposure (with a pinch of commodities).  The annualized return is boosted to 12.1% while the standard deviation rises proportionately less, to 11.2%.  (Remember, this is still a 60/40 portfolio with 40% in five-year treasuries.)

But here’s where Swedroe pulls the rabbit out of the hat:  He re-engineers the portfolio, flipping to a 40/60 portfolio, proportionately reducing all of his equity allocations and boosting his T-notes to 60% of the portfolio.  The net result is a portfolio with a 10.9% annualized rate of return—slightly higher than the original 60/40 portfolio—with a drastically lower standard deviation of 7.9%

Same return.  Less Risk.

This, of course, is all hypothetical.  This happened in the past, and for many reasons, it may not happen again.  These illustrations are not a recommended course of action for you or your advisor, but instead a demonstration that it is possible—and worth the effort—to work to this end.

Because we can’t keep hiding from the following logical thread:

1)   Volatile markets increase investor stress (even to the point of physical illness).

2)   Heightened investor stress leads to bad decisions—by both investors and advisors—that reduce investor returns.

3)   Market analysis suggests that portfolios can be engineered to maintain healthy long-term gains, while at the same time dramatically reducing the intensity of market gyrations.

How could we not, then, conclude that more investors would suffer less stress, thereby reducing (hopefully eliminating) their behavior gap, thereby allowing investors to hold on to more of their returns?

Isn’t that the point?

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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In 2014, Accomplish More By Doing Less

DO LESS-01Instead of bullying yourself into adopting new practices that are designed to overhaul your life for the better in 2014, consider finding the path to success by simply doing less.

The arctic blast of our fledgling 2014 offers a chilling reminder that the kindred warmth of the holiday season is over.

That’s enough being. It’s time to get back to doing.

“So, how’s it going?”

“Good. Busy. Super busy.”

“Me too. Never been so busy.”

It’s as if there is a self-worth contest sure to be won by the contender most frazzled.

But busyness is no virtue. If anything, it makes us—me included—distracted, forgetful and often late. It diminishes our capacity and saps our creativity.

That’s why we can actually accomplish more by doing less.

But how do we decide which activities absolutely must stay and which might have to go?

Five Minutes to a Leaner You

This quick and simple exercise should give you several top candidates for the chopping block. You need only one piece of paper with a line down the middle (or click HERE for a printable form). On the left side, write LIFE-TAKING, and on the right side, write LIFE-GIVING.

life-taking-life-giving---blank-2Fill the Life-Taking column with the roles (or tasks within roles) that drain you. They’re onerous chores, not labors of love.

On the Life-Giving side, list the opposite—those practices you can pursue for extended periods of time, wondering where the time has gone. You might be tired after a long day of life-giving activities, but you’re not weary.

I should be clear that this exercise is not a license to shed roles to which you’ve pledged yourself—like being a good parent or spouse—or common duties that appear on no one’s life-giving list—like changing diapers or cleaning dishes. Heck, the president of my company, Drew Tignanelli, washes whatever dishes he finds in the company kitchen sink.

But if the majority of your roles and the duties you’ve accepted are life-taking, I encourage you to consider making some difficult decisions in an effort to improve that ratio. That may mean saying yes to something, but it almost certainly means saying no.

Two caveats:

1)   Following through on this exercise may be simple, but it’s not easy. Stakeholders are likely to be disappointed, whether you’re giving up a board seat, book club, church committee or poker night. Your income may also be reduced if you sacrifice an activity that creates income, change jobs or invest in furthering your education.

2)   Many activities are not wholly life-taking or life-giving. For example, last year I decided that maintaining a presence on Facebook took more life than it gave. I certainly derived some benefits from being on Facebook, connecting with friends and family, but the net effect was life-taking. (By the way, I dumped FB six months ago and don’t miss it at all.)

Addition by Subtraction

You can cause a monumental shift for the good in your life and work by simply removing life-taking activities. Your performance in life-giving roles has room to flourish, increasing your productivity and satisfaction. Even more surprising, some activities will move from life-taking to neutral—or even life-giving—after your overall burden is lightened.

Hitting the delete button on even one or two life-taking commitments can make you a better partner or parent, boss or employee, friend or family member. And especially for those whose vocations fall under the creative heading, creating more blank space on the canvas is essential to maintaining and improving your art.

Special thanks to Josh Itzoe, a colleague and good friend, for encouraging me to undertake this exercise several years ago.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.