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I meet few humble advisors. Most are supremely confident in their knowledge of all things financial.
This confidence is rarely justified.
There’s a lot no one can possibly know, especially about the future direction of the market or even how to best structure a portfolio. I was struck by this observation by Kenneth French, one of the researchers (along with Eugene Fama) who identified the value premium in 1992. French did research to determine whether he could, “confidently conclude that the expected value premium in the U.S. declines or even disappears.”
His conclusion: “The short answer is you pretty much can’t say anything.”
While advisors like to extol the benefit of financial planning, their effort to bring certainty to the process is hampered by their inability to determine the date of death of their clients or their marginal tax rate at retirement.
While projections are helpful, certainty is elusive.
An excess of confidence is both unwarranted and harmful.
Pervasive biases
A recent study examined why we’re so motivated to stick to our beliefs, regardless of the evidence and show little interest in understanding those who hold contrary views.
The authors noted the pervasive biases that cause us to behave in this manner and to adhere to our views with “tremendous confidence,” even when it is unwarranted. Our stubborn adherence has, “...stifled sincere, fact-based, and open discussion over the merits and problems accompanying the endorsement of certain positions.”
The most obvious (and harmful) example of this phenomenon is the current controversy over wearing masks to help prevent the spread of Covid-19. While the science supporting masks is compelling, it hasn’t persuaded millions of Americans who are opposed to wearing masks due to denial, a desire to remain in control, a belief the rules don’t apply to them ,or an indifference to the consequences of not doing so.
To change the mind of those who disagree with you on this or any other “hot button” subject, it’s important to understand the role of intellectual humility.
Intellectual humility
Those with low intellectual humility have an abundance of confidence in the superiority of their beliefs and don’t take counter-arguments seriously. When you refuse to consider opposing views, it’s a short intellectual leap to denigrating the intelligence of those who hold them.
Those with high intellectual humility recognize their beliefs could be wrong and are willing to dispassionately consider facts that challenge their views.
The impact of high or low intellectual humility
In six studies of 2,494 Americans, one study found a direct relationship between high and low intellectual humility and the attitude we have towards those who disagree with us.
Participants with high intellectual humility, who conceded their beliefs and attitudes might be incorrect, were less likely to regard those who disagreed with them as, “unintelligent, irrational, and ignorant.”
The opposite effect was observed in those with low intellectual humility. They tended to, “derogate the intellectual capabilities and moral character of sociopolitical opponents,” more than participants with higher intellectual humility.
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Applying these findings
As advisors, you may disagree with the views of your prospects and clients on issues relating to investing (e.g., active vs passive) as well as unrelated issues (e.g., politics and guns).
A primary take away from this study is that rigid adherence to your position (by marshalling the facts or assuming you are more intelligent than the other person) is unlikely to resolve those conflicts.
A far better approach would be to try to understand the perspective and the basis for the other person’s contrary view. This requires a genuine interest and curiosity many of us lack.
This approach doesn’t require you to adopt views different from yours. Your new goal is to understand the perspective of the other person, in a non-judgmental way, without trying to demonstrate you’re “right.”
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
