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I’ve always valued the wisdom of this quote attributed to Jack Bogle:
While the interests of the business are served by the aphorism, “Don’t just stand there. Do something!” the interests of investors are served by an approach that is its diametrical opposite: “Don’t do something. Just stand there!”
You probably convey this advice to your clients, especially during periods of extreme market volatility. You correctly believe you play an important role in keeping them from making emotional decisions that will likely impair their long-term returns.
Do you apply it to interactions with your clients?
Here’s what I mean.
Compelled to advise
We all suffer from compulsion to dispense advice.
A series of four studies found:
- People who give advice feel more powerful after dispensing it.
- Those who want to boost their feelings of power are more inclined to give advice. It has that effect.
- While giving advice increases your sense of power, if you’re told the other person didn’t take your advice, your sense of power diminishes.
- Giving advice can improve your confidence.
While these motivations for giving advice make sense, here’s what’s striking.
If giving advice makes you feel more powerful, the recipient of the advice feels less powerful, even subservient. Is that really the way you want your clients to feel?
Flawed assumptions
The first class I took at law school was contracts. I can still remember the professor striding into the classroom. Without uttering a word, he wrote these two words on the blackboard: Assume nothing.
That was the most valuable advice I’ve ever received. Whenever I start a new relationship with an employee, I tell them that story. I ask them to follow that guideline and to always ask questions before making what they may believe is an “obvious” assumption.
When you give advice, you’re assuming the other person wants to receive it. How do you know that?
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Even if they’ve asked for your advice, don’t assume they want it. Instead of immediately dispensing it, explore their query by asking questions like, “Can you tell me more about why that’s a concern to you?” Then, “What can I tell you that you would find helpful?”
You’ll be amazed how the answers to questions like these will alter your initial impression of what’s being asked of you.
I coach my clients to follow this strategy. One of them recently told me this story. A client called in extreme agitation when the market tanked in March. He expressed great concern about his portfolio, the uncertainty caused by the pandemic and the possibility of a global depression (which he felt was a “likely” outcome).
When he finished, my client asked him what he would find most helpful to hear from the advisor.
There was a long pause. Finally, the client said, “Actually nothing. I guess I just wanted the comfort of knowing you would be there to listen to me. I suspect you probably share the same concerns.”
Lesson learned.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
