1 Comment

Guided Mastery: Helping Your Clients Find (or Re-Discover) Investing Confidence

As you’re scrolling through your daily videos (we all do it), you may come across an Olympic-level skier falling right out of the gate, an accomplished stage actor flubbing his lines or a famous crooner forgetting the words to the National Anthem on live TV. Besides the fact that, for some reason, many of us are unable to stop watching these types of videos, one thing unites each incident: a crisis of confidence.

Confidence is a fickle, erratic thing. It can take years of hard work to gain, and only seconds to lose. In the world of investing, confidence can be one of the most important pieces of the puzzle when it comes to staying on track toward our goals, and yet it doesn’t receive nearly the same amount of coverage as topics like becoming a successful investor.

How do we help our clients go about getting, or re-discovering, the self-assurance we need to get to our goals?

The Root Cause: What Are We Really Afraid Of?

Money remains the single top stressor for Americans. In fact, according to the American Psychological Association, money has been our top concern since 2007, the first year the organization ran the Stress in America survey. It comes as no surprise that money was on the minds of many in late 2007 (and still is) given the market environment during that time.

On October 1, 2007, the S&P 500 closed at a level of 1,549.38, a high at that time. From there, things went steadily downhill, with the index bottoming out at 735.09 on February 1, 2009. This brutal bear market likely took a toll on the confidence of all investors.

David Kelley, international influencer and co-founder of innovative design firm IDEO, believes that a loss of confidence is often comes from our fear of judgment.

In his popular TED Talk “How to Build Your Creative Confidence,” Kelley discusses a situation in his third-grade classroom where his friend Brian was making a horse out of clay. A girl sitting at Brian’s table leaned over and said, “That’s terrible. That doesn’t look anything like a horse.” Brian’s shoulders sank, and he threw the clay back into the bin, never to use it again.

I have a similar story involving struggling with multiplication tables when I was a child, and I still vividly remember how many years it took to feel even remotely confident in anything that requires math (I still ask my wife to double-check tips at restaurants). According to Kelley, these types of stories are common, resulting in many of us growing into adulthood feeling like we’re “not creative,” “not good at math” or “not the investing type.”

Kelley dug deeper into the issue of confidence loss to try to find a solution. He began working with Albert Bandura, a renowned psychologist and innovator in the field of phobias. Specifically, Bandura pioneered a process he terms “guided mastery,” in which, by taking small steps, a person can move from debilitating fear to complete confidence (or “self-efficacy”). To illustrate the “guided mastery” process, Kelley described Bandura’s experiment with ophidiophobia, or the abnormal fear of snakes where Bandura guided a group of people terrified of snakes from refusing to go into a room with a snake to holding the snake in their laps.

If you’ve ever known anyone with a crippling fear of snakes, you can understand how amazing this truly is.

While Kelley’s point is about creative confidence, I believe the process of “guided mastery” has interesting parallels and potential applications to the world of investing.

In many ways—especially for those who are exposed only to the constant stream of negative retirement savings statistics, scare tactics designed to initiate sales conversations and forecasts of another impending financial crisis—investing in the markets can be a truly scary proposition.

If you use the parallel to a phobia, one false move can be enough to make us lose our confidence, possibly for good. Kelley and Bandura show us that, through small steps and minor victories, even the most powerful phobias can be overcome. Here are a few tips to help clients get started.

1.) Recommend Clients Make a List of What They Don’t Know

When it comes to finding a place to start in building investing confidence, it might make sense to have clients start with what they know they don’t know.

By encouraging clients to make a list of the top five or 10 things they know they want or need to know about finance or investing, you have provided them with an all-important foundation. From that list, you can work together to come up with search terms to put into Google or their search engine of choice.

Once they’ve read a few articles and/or watched a few videos, they will be able to check a few of the basic items off their list, and will also begin to understand what type of educational content works best for them. The more they consume, the more they understand what they like and what truly helps them build knowledge and confidence.

The rise of the do-it-yourself culture, powered by video platforms like YouTube, has made learning the basics of almost any skill and/or industry more accessible than ever before. In addition to holding an amazing library of educational content, YouTube is also the second-largest search engine in the world by volume, and thus can provide a great place to start checking items off of their list.

As you help clients move through their list, I think you will find that you’re able to help them add new questions and topics to a larger list as you go. Not only will they be able to dip their toes into more advanced ideas as they move forward, but they will also be able to connect the original terms they learned with new terms, which will lead to a wider understanding of the topics themselves.

2.) Encourage Clients to Celebrate the Small Things

As you work toward helping clients gain knowledge and build confidence, don’t forget to encourage them to celebrate the small successes along the way. Yes, it’s a cliché, but I believe there’s quite a bit of truth behind the common platitude for a couple of reasons.

First, the road to investing confidence can be long, and focusing solely on the ultimate goal can be overwhelming. While a focus on the finish line is certainly important, adding a few horizon lines along each step of the journey can make the goal seem more achievable. Our brains are actually not wired to hone in on the distant future, so maintaining short-term benchmarks is generally a more effective way of staying on track.

Second, never underestimate the power of positive reinforcement. Because saving and investing success generally happens over the long term, it can be difficult for clients to see how much of an impact their hard work and diligence is making from month to month. Celebrating the fact that they saved 10 percent of their paycheck over a three-month period or that they made it through a whole year without taking any money out of their retirement savings can help them maintain perspective beyond what the numbers are showing over the short term.

3.) Help Your Clients Avoid Dwelling on Their Mistakes

Investing over a lifetime is a marathon, and it’s natural to make mistakes along the way. As you well know from your daily meetings, when investors do make an error or miss an opportunity, it is often magnified by the fact that they are forced to watch constant coverage of the teenage billionaire who went right when they chose to go left. It’s not a great feeling, but few things can hurt our confidence more than attempting to compare our situations to others. It’s certainly easier said than done, but it can pay to take a moment to remind our clients (and help them come to the same conclusion), for the most important things at least, that they are the best judge of their own success.

As it pertains to investing and the financial markets, clients have to give themselves a break when it comes to a tough week or month in the market. I encourage you to help clients take it to the next level and to completely get away from thinking about the markets in terms of “winning and losing.” The potential to win or lose implies a game, and it shouldn’t be a game when it comes to their hard-earned money.

Instead, help clients think of each bump in the road as the next step toward confidence. When I was first starting out and knew very little about investing basics, when I saw or heard something telling me I was behind in some way, I committed to making sure I understood exactly what that meant.

If you can help train your clients to either do the research on their own or come directly to you when they receive an email telling them about a decision they must make right away, see a term they don’t understand or come to a crossroads at which they struggle to make a decision, you can serve as that calming element that makes each mistake or stumble a lesson.

4.) Help Prospects Know That Expert Help Is Available

Each of us has instant access to an unbelievable amount of information on almost every topic imaginable. Like anything else, it’s up to every investor to decide if they want to go it alone, or enlist expert support.

It’s certainly open to interpretation, but in my opinion, the concept of guided mastery can work both ways in the investing world. Whether an investor chooses to work with a financial professional or not, the creation of a plan, the diligence to stick with it and the commitment to build knowledge one step at a time are all important parts of the process. There are, of course, pros and cons to both strategies, and the decision all comes down to each investor’s specific needs, goals, and unique financial situation.

Because the world of investing is so vast and complex, I truly believe financial confidence and even skill require a commitment beyond simply mastering the nuts, bolts and basics. At some point, most investors will reach the point where they can no longer manage their financial landscape on their own. From a prospecting standpoint, this is why creating (or at least sharing educational content) can be so important. When that investor reaches the point of wanting or needing help, I believe they are more likely to go with someone who has already provided them some value along the way.

All else being equal, I believe that, at the very least, investing confidence is something that is attainable for us all. Just as Kelley encourages those who have lost their creative confidence, through a series of small steps and successes, you can be the guide who helps clients work toward a place where they feel they have done what they set out to do, and eventually, take the last step and touch the snake.

Dan_Martin_Headshot
Dan Martin is the Director of Marketing for the Financial Planning Association®, the principal professional organization for CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals, educators, financial services professionals and students who seek advancement in a growing, dynamic profession. He is an award-winning author with a diverse financial services industry background in marketing and communications. He earned a journalism degree from the University of Denver and his MBA in marketing from the Daniels College of Business.

 


Leave a comment

Selling Diligence

A client’s anxiety is a stew pot of emotional, historical, contemporary, economic and global ingredients, and it’s all focused on the future. Add to this the sheer complexity that exists with thousands of investment, insurance and trust products, and the client seeks an advisory relationship to take the sting of uncertainty away. This is no different than someone who is ill gaining comfort from a doctor who ably implements a treatment plan.

Yet, in this uncertainty, clients still yearn to know “What’s going to happen?” Few advisers position themselves as market forecasters (i.e., if all the brain power, computing power and self-interest can’t predict even six months out where the price of oil is headed, what does it say about predicting anything in the market?), but this anxiety gnaws at clients with the wounds from 2008 still fresh.

With a question so important yet so unknowable, what is under your control that can be a salve to your clients’ anxiety? In a word: diligence.

Diligence as a Tactical Tool

In my blog “Wealth Protection as a Practice Strategy,” I promote wealth protection—minimizing the loss of dollars to investment performance, taxes, fees and unprotected risks—as an operating strategy largely under an adviser’s direct control, and one that has the best path to wealth creation (i.e., you can’t create wealth unless you protect it first).

Wealth protection is like a fortress, but it is only a first-line defense against an enemy’s incursions. A fortress requires watchmen in towers looking beyond the walls, ready to spring into action should any threat be seen. Think of diligence as watchful eyes.

As there are a number of wealth protection tactics, so too does diligence offer an array of defined and concrete actions.

Diligence Categories

1. Planning diligence. A comprehensive financial plan is detailed itself, but once the plan is implemented, diligence keeps it responsive to a client’s evolving needs and circumstances.

Positioning statement: “We diligently maintain the wealth plan as a dynamic guide for your long-term security by ensuring that it is up to date with the current state of your needs, anxieties and aspirations.”

2. Investment diligence. The various portfolio solutions, insurance products and trusts are the plan’s execution implements. Although an investment plan may liberally use passive ETFs or mutual funds, doesn’t mean that the execution is passive. Here, diligence shows itself through validation that the underlying investment products adhere to their stated diversification, efficiency, income and liquidity purposes.

Positioning statement: “We select investments, insurance products and trusts on the basis that their characteristics and qualities fit with what your plan requires, and, most important, we review each of these products and their providers to ensure that nothing has deviated from what we expected.”

3. Monitoring diligence. As markets move, a client’s investment and property wealth also change. Rebalancing is known for resetting portfolios to the target allocation and, in the process, enforcing “buying low and selling high.” However, rebalancing has a higher purpose in adjusting all wealth sources to the plan’s requirements, with special emphasis on the plan to create liquidity from property wealth as needed.

Positioning statement: “We track your plan’s execution to make sure that the portfolio design, investment products, insurance, trusts and your property fulfill their intended purposes in delivering the plan’s liquidity, stability, growth and income requirements.”

4. Communication diligence. According to a Financial Advisor magazine study of 1,375 advisers, 72 percent of advisers identified “failure to communicate on a timely basis” as one of the top three termination reasons. To an adviser’s essential services, maintaining diligent communications is a vital treatment for a client’s anxiety, particularly during market volatility.

Positioning statement: “We hold regular meetings in which your plan sets the agenda in discussing how the plan’s execution is unfolding. In addition, we give you frequent updates as market, regulatory, tax, planning and risk issues arise.”

Tangible Diligence

A challenge exists because “diligence” lacks tangibility and much of the actual work occurs behind the scenes. In client meetings (and always annually), produce a tangible, written summary of activities from the different diligence categories.

This summary does for your diligence services what the performance report does for the investing solution (see “Performance Reporting: The Plan’s Tangible Evidence”). Furthermore, for prospects, giving an example of the “Summary of our Diligence” gives evidence that your firm’s day-to-day actions go beyond mere words.

An adviser’s diligence releases a client’s anxiety, and, in so doing, the client base is solidified.  Both outcomes represent meaningful rewards.

Kirk LouryKirk Loury
President
Wealth Planning Consulting Inc.
Princeton Junction, New Jersey