Master Communicator

Master Communicatorblog

Carl Richards shares his 20 years of experience trying to help advisers communicate more effectively with their clients.

Searching for the perfect investment is counterproductive for clients

The best investments are the options that align with clients' values and goals

Feb 25, 2016 @ 12:01 am

By Carl Richards

+ Zoom

Have you ever had a client who's really used to being in control? I had a client like that once. He was a great guy and a friend who also happened to be a super-successful entrepreneur. For him, when he wanted something to happen, he made it happen.

One day, he was frustrated and said, “I don't understand why you can't just do your job.” More than a little confused, I asked him what he meant. “Well, your job is easy. I just want you find the best investment before it goes up and sell it before it goes down.”

I'm betting you've heard something similar from at least one client. And of course, as soon as I got him settled down, my client realized that his request didn't make a lot of sense.

So-called “perfect” investments don't really exist. But that doesn't stop the media (and sometimes our clients or even ourselves) from suggesting they're possible. If we just work hard enough and stick with it long enough, we can find “perfect” investments.

Now, let's be clear, the best investments for your clients are the options that align with their values and goals. But that isn't what comes to mind for most people when they hear “perfect.” Instead, we sometimes talk ourselves into thinking that we can find an investment right before it goes up and sell it at the top. This sounds so easy, right? It's no wonder we get sucked into thinking the search is our primary job.

In reality, this well-intentioned search often leads to behavior that's counterproductive, even dumb, in hindsight. Really, after we've put all the effort into finding the best investment (e.g., the fund with the lowest fee, the investment that fits their goals), our work needs to shift to behavior.

Because one poor behavioral mistake can blow up even a “perfect” investment, and we need to have this conversation with our clients sooner rather than later.

Carl Richards is a certified financial planner and director of investor education for the BAM Alliance. He's also the author of the weekly "Sketch Guy" column at the New York Times. He published his second book, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money (Portfolio) last year. You can email Carl here, and learn more about him and his work at BehaviorGap.com.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Stephanie Bogan: How financial advisers can achieve more by reframing their realities

By revaluating the choices they make and the outcomes that result from them, financial advisers can make sure they're properly serving those most important to them — their clients, according to Stephanie Bogan, founder of Educe Inc.

Latest news & opinion

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

Redoing the math on a 4% retirement withdrawal rate

Given the current interest-rate environment and other factors, advisers disagree about whether the number is too conservative or not conservative enough.

House panel passes bill to replace DOL fiduciary rule with one requiring disclosure of conflicts

Measure likely to continue in partisan advance in House, but could stall in Senate.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print