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When I was an advisor, I often had to deal with prospects who fundamentally disagreed with my investment philosophy. I espoused index-based investing. Those prospects were enamored with active management.
My persuasion strategy was informed by my training as a trial lawyer. I marshaled the facts and argued for my viewpoint, like giving a closing argument to a jury.
I was rarely successful.
Then, I did the research.
Everything changed.
The problem with persuasion
One study used two experiments to investigate the relationship between factual knowledge and opinions.
In the first experiment, participants were presented with a news article containing a factual error about the Iraq War and were then given corrective information about the error. While the corrective information led to a slight increase in factual knowledge, it didn’t significantly change their pre-existing opinion.
In the second experiment, participants were presented with news articles containing factual errors about the Affordable Care Act and the federal budget. They were then given corrective information about the errors. The study found that while corrective information led to a slight increase in factual knowledge, it did not significantly change opinions about the Affordable Care Act. But it did lead to a significant change in their views about the federal budget.
The study identified the “backfire effect," a phenomenon where corrective information strengthens a person's belief in a false or misleading idea rather than changing their mind.
The backfire effect can be triggered when the corrective information is perceived as threatening a person's worldview or identity, causing them to reject the information and become more entrenched in their original belief.
That’s precisely what happened when I tried to convince prospects my investment philosophy was superior to theirs. It contradicted their investment beliefs and reinforced those misconceptions.
Neuroscience supports this view
Neuroscience research points to specific brain areas involved in decision-making, like the prefrontal cortex and the amygdala. According to another study, attempts at persuasion can trigger a defensive mechanism in the brain, often called the “fight-or-flight” response.
The amygdala is activated, impairing rational thought and causing the other person to cling more tightly to their original viewpoint.
My approach suffered from the double whammy of triggering the backfire effect and a “flight-or-fight” response.
A better way
I was sure my views were “right.” Unfortunately, my confidence impaired my ability to persuade.
I would have been more persuasive if I presented the pros and cons of active versus passive investing and left it up to the prospect to make the “right” decision.
There’s significant evidence (summarized here) that uncertainty can be “a powerful tool of persuasion.” It can be especially powerful when experts (like financial advisors) are more tentative and show vulnerability about their opinions.
Aakary Tormal, a professor at the Stamford Graduate School of Business, has studied the impact of uncertainty when expressed by experts. He explained why it’s so effective here: “The phenomenon at work here is what we call expectancy violations. People expect experts to be confident. Violations of that expectation surprise them... A surprise draws you in and makes you pay more attention. It gives the review more impact.”
A win-win scenario
You're building a foundation of trust and partnership by allowing others to come to their own conclusions. A client-centric approach, focused on empowering prospects and clients rather than directing them, is more persuasive and will lead to a more productive, meaningful relationship.
This approach will result in better conversion rates and make you a trusted advisor, creating a win-win situation for both parties.
Dan coaches evidence-based financial advisors on how to convert more prospects into clients. His digital marketing firm is a leading provider of SEO, website design, branding, content marketing, and video production services to financial advisors worldwide.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
