“We must manage our behavior to meet our objectives. Excellence is not an act, but a habit. We are what we repeatedly do. We must manage our behavior to meet our objectives. Excellence is not an act, but a habit. We are what we repeatedly do.”
These words were printed on the piece of paper pinned to the bulletin board in the football locker room of my high school by John Wolfgram, the head coach of the Red Riots in South Portland, Maine. The idea that excellence is not an act, but a continued behavior, is attributed to Aristotle. From the first time I walked into that locker room until the last time I walked out, those words were front and center, and I find them quite relevant to our work as financial advisors.
The Biggest Financial Mistake to Avoid
Speaking of football, I’m reminded of another legendary coach - Lou Holtz from Notre Dame - who said, “You don't need big plays to win; you just have to eliminate the dumb ones year in and year out.” That’s another truth to live by, especially in our work as financial advisors. Is this not the very essence of our value proposition? To have the willingness and the ability to save our clients from making a horrendous mistake needs to be our mission. That is our guiding principle followed closely by the desire to boisterously express our faith in financial planning rather than in forecasting the economy, or trying to time the marketing, or convincing someone based on performance.
Our clients must actively accept this as our role, right? They must accept that if they are looking to hire us, our first job is to prevent them from making a huge financial mistake. They must also accept that the financial plan is a living, breathing organism that shows the way to reaching their objectives. How many people log into our planning platform to check and see how they are doing? Quite a few. Clients routinely tell us that they like to visit their plan whenever they want, see their assets grow over time: their goals getting closer and closer to reality. Despite the setbacks that we occasionally experience – and that are always temporary- people who stay on their plan end up staying on the path to their goals.
Understand the Value of Your Financial Advisor
The value that we provide as advisors by standing in between our clients and some terrible mistake is hard to capture. Sometimes it feels like that value is not recognized or even present. Think about all the forms of insurance we purchase to protect our homes from damage, our cars, and even our lives. We hope that the premiums we pay on these insurances will be wasted. We don’t want the catastrophe to happen, and yet we want to know that if it does, we have something in place to protect us. The more time goes by without collecting on the insurance, the happier we are.
When it comes to the value of a financial advisor: the insurance that we provide by helping prevent financially disastrous moves for our clients is invaluable. People may, upon hiring us, know how valuable a role we play. Over time, though, that memory will fade. However strong their appreciation is – at the beginning of the relationship – to have our guidance, or to be told that they will at times be tempted to abandon their financial plan – they cannot store this memory in their minds. Even the best of clients will forget our role and our value.
Acting Only In Our Client's Interest
A client comes to mind who tends to get nervous every time the market moves down. Now that he is within two years of retirement, he’s particularly on edge. His nervousness is finally to a point where I had to decide, preemptively, to tell him it was time to move on: he is no longer a client. And it’s not because he was nervous – to be nervous about the markets is human and understandable. It was also not about our fee – he was happy to pay our fee. What pushed me to decide our relationship had to end was that he wanted to dictate how we invest his money, and I didn’t agree that what he wanted was the best course of action for him. A client is not going to dictate to us to do something that we know is a disservice to them long term. This client could not remember or understand that his financial plan was already beautiful – and for that reason, we had to part ways. It was a tough decision for me.
A conversation with a friend who’s in the business gave me some perspective. He pointed out all the times a client doesn’t express how nervous they are about their financial situation, and how we as financial advisors may assume that if they are not outwardly and explicitly complaining, they understand the value we provide. If we are not surfacing the things that may be causing our clients anxiety, we are missing out on the opportunity to demonstrate our value. If a year has gone by and a client hasn’t talked to me about going to cash in a bear market, or if they haven’t said, “Hey, what do you think about Bitcoin?” or “The state of the world is not good,” then that’s a subtle sign that our value may have diminished in their minds.
Have a Proper Diversification Strategy
If we are systematically educating clients, reminding them of all the ways they may be tempted to veer off course, our value isn't diminishing. If anything, our value is growing and the premium they're paying us is well-earned. If a financial advisor wants to test whether their work is of value, the simplest way is to ask a client for an introduction to someone else who could benefit from their services.
One could say that 2022 has been a stressful year. Not that it's any different from the past, but there's a lot going on. Despite all the things that have caused stress, we can’t for a moment think that our clients have not benefited substantially from the plans that we have put in place for them. At Beck Bode, those plans are fueled by a portfolio of equities. I had a conversation with a client whose portfolio is 100% invested in equities (as are all our portfolios), who said that despite the market volatility,, ‘Geez, I don’t know what kind of gymnastics you guys are doing over there in my portfolio, but it’s working.’ I took the opportunity to remind him and his wife that this is exactly what they pay us for, and that it’s not gymnastics, but rather our constant pointing to the necessity to stay in investments that have the best opportunity to grow their purchasing power over time.
Successful Investing is a Long-Term Game
Our job, at Beck Bode is to not let anyone soften our clients’ anxieties about ‘down’ markets by recommending a reallocation designed to temper volatility, because we know that tempering volatility means tempering long-term returns.
At a minimum, once a year (or more), perhaps in the most rigorous meeting of the year - an annual review – is when we must remind clients that “No, I will not let you do that!” to whatever will throw them off course. We can’t say it in passing either, it must be straightforward and clear.
Whether the conversation is about fees, or about some other investment that the client thinks may be a better choice for them, we don’t earn our fee by making a one-time excellent recommendation, a one-time presentation, or by putting together the ‘perfect’ portfolio, or by saying just once, ‘At some point, you will want to pursue a course of action that will be a terrible mistake.’ We earn our fee by repeatedly reminding our clients of all the ways we are standing between them and their unstoppable drive to get in their own way. If Aristotle’s words are true, and “we are what we repeatedly do,” then as financial advisors, we are the barrier that stands in the way of catastrophic financial decision-making.
When we do that repeatedly, we become excellent.
Ben Beck is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life.