By Miles Clyne
God gave us two ears and one mouth so we could listen twice as much as we speak. I’ve heard this expression a number of times, and I get reminded quite often of how important it is. Working in the investment industry, I have the opportunity to help people decide what they really need from their investments versus what they want. These can be two different things and they can be dynamic and change, sometimes frequently.
Needs vs Wants
Needs are what you require. Wants are not. Wants are fed by our emotions. For most, our savings have needs that come first: food, clothing, shelter-- these are the essentials. Wants should come after, but too often we treat wants as though they are needs. When I say we, I mean advice givers in the financial service industry as well as the people seeking advice. It is much easier to sell something that people want, as opposed to something they should be doing.
Trying to educate the importance of focusing on your needs first is an interesting process. Figuring out what the majority of us want from investing is pretty easy, we want the best returns with the least amount of risk, and we want it NOW! Getting the results is the tricky part. Risk means different things to different people. Taking risk for some people is buying GICs that don’t ever go down in value, even though long-term they may return very little. Whereas for others, living with plus or minus 50% in the value of their investments is totally acceptable. But they expect much higher returns over a reasonable amount of time for taking on the additional risk. Fortunately, most of us fall somewhere between these two examples.
I keep getting reminded that the best way to get to the best solution is to listen. Regardless of whether you are being paid for your advice or giving it freely to a friend, putting yourself in the other person’s shoes is critical. Unless we listen and ask good questions, we don’t know the experiences that brought someone to a certain place and way of thinking. Without this knowledge, getting our advice right will be like throwing a dart blindfolded after being spun around three times, then expecting to hit the bullseye.
Getting a better understanding about someone involves empathy and understanding when listening to their story. I was reminded of this with a relatively new client. He’d left a very long-term advisor who he felt was a decent person, but had delivered negative results. So he was suspect of everything; his trust in both the markets and our industry was broken. Everything we did was under the microscope. We ended up changing strategies twice in the first year. Each move was after we had had good discussions. But truthfully, most of what we did had been done to serve his wants. Consequently, the decisions were emotional, and to put him at ease knowing we could adapt to what was most important to him.
I knew his background and lack of success after working for years with what sounded like a well-intended advisor. He needed more time to get his back his confidence and peace of mind. He is a smart guy. But like most us, we are the sum of our experiences. When we have negative experiences, it’s reasonable to be gun shy as we don’t want to repeat them. Giving people the opportunity to express themselves and hearing them is important in helping them move forward. Sometimes we just need to shuffle sideways for a bit before that confidence comes back. In a perfect world as advisors we get it right the first time and the investor is 100% comfortable. But other times, as our emotions twist and turn us, we can only help long term by using the gift of listening.