Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
As a group, registered investment advisors (RIAs) are extremely intelligent, conscientious and caring. At least that’s my experience. They are diligent about keeping up with the latest developments in investing and financial planning. They take the time (and incur the expense) to attend conferences and obtain certifications to ensure they are current.
The work isn’t easy. The unpredictable and volatile nature of the market creates constant anxiety and the rewards aren’t all that great. The median salary for RIA’s is only $85,000.
Of course, RIAs who generate meaningful assets under management can significantly increase their earnings. Every RIA appreciates this. Many believe superior knowledge and expertise is key to capturing more business, but they often overlook other factors. There are also some misconceptions about selling that actually impede success. Here are some examples.
Reliance on quick fixes
There’s a huge industry dedicated to providing quick fixes for those seeking to improve their lot in life. These fixes range from walking on hot coals to demonstrate a positive mindset to repeating mantras like “I can do it” or “I am an attractive person.” My personal favorite is this recommendation attributed to Émile Coué de la Châtaigneraie, a French psychologist and pharmacist in the 20th century: “Every day, in every way, I’m getting better and better.”
In doing research for my book, The Smartest Sales Book You’ll Ever Read, two facts stood out. First, the size of the self-improvement market is huge, estimated to be as much as a $9.6 billion industry. Second, I could find no support that quick fixes work, while I was able to find significant, credible evidence that it doesn’t. According to Steven Novella, an academic clinical neurologist at Yale University School of Medicine, there is a lot of published data that would be very useful to those seeking self-help, “but the big sellers in the self-help industry seem to be completely disconnected from that evidence. What they are selling are made-up easy answers, personality, and gimmicks.”
There are no quick fixes to gathering more assets under management (AUM).
The role of self-confidence
Many believe that confidence is highly correlated with success. It’s easy for RIAs to have this misconception. We have expertise in a complex area. Typically our knowledge of investing far exceeds the knowledge of those with whom we are dealing. It’s easy to project an air of intellectual superiority.
The reality is quite different. According to Tomas Chamorro-Premuzic, PhD, a prolific author of six books and over 100 scientific papers, people with low self-confidence (but not extremely low) are likely to be more successful. Chamorro-Premuzik found that low self-confidence makes people more aware of their shortcomings. Being self-critical is helpful in achieving success. Those brimming with self-confidence (You know who you are!) tend to ignore negative feedback.
Those with low self-confidence are more likely to work harder to achieve success. Those brimming with confidence often believe hard work is for more-ordinary people.
Other negatives of high self-confidence include arrogance, lack of personal accountability and ignoring one’s failures and shortcomings rather than using them as a motivation to improve.
On balance, don’t adopt the uncomfortable persona of a supremely self-confident person — accept who you are instead.
The fallacy of positive thinking
Many believe in the power of positive thinking. Thinking positively is not necessarily bad, but it has its limitations.
There’s a big difference between a positive fantasy and a positive expectation. Research indicates that positive fantasies (winning the lottery, or becoming a billionaire) are actually detrimental to performance. They sap energy, diminish motivation and cause people to pursue unrealistic goals instead of realistically planning. Positiveexpectations , based on a realistic assessment of past experiences, make it more likely you will achieve your goal.
Underestimated traits
Your parents probably told you this, but it’s worth repeating. Honesty is the most admired trait in both your personal and business life. Many surveys have reached this conclusion.
Honesty will not only help you achieve your AUM goals, but it also has well-documented, collateral benefits. These include closer, more meaningful relationships with loved ones, friends and colleagues. Honest people are less stressed, more trustworthy and attract like-minded people.
For RIAs, being honest (and being perceived as such) means always putting the needs of the customer first. I recently advised a young Silicon Valley entrepreneur that he would be well served by a “robo-advisor” rather than paying our higher fee. He didn’t need any of our financial planning services, he had the discipline to stay the course in bad times and he enjoyed the details involved in managing his own portfolio, including rebalancing and tax-loss harvesting. I didn’t get his business, but he has sent me a steady stream of referrals.
I distinguish sincerity from honesty. If you truthfully explain the risk and returns of a proposed investment, you’re being honest. Sincerity is about genuinely being yourself. If you tell a prospect you deeply care about her and her family and will do whatever is in their best interest, you’re being sincere, if that’s true. If your real agenda is to maximize your advisory fees, you’re being insincere.
French diplomat and novelist Jean Giraudoux supposedly said: “The secret to success is sincerity. Once you can fake that, you’ve got it made.”
The first part is right, but the second isn’t. Sincerely can’t be faked.
Other than honesty, nothing is more important to your success that the reality and perception of being sincere. An insightful report prepared by the Arthur Page Society noted: “Authenticity will be the coin of the realm for successful corporations and for those who lead them.”
In future articles, I will discuss other factors that correlate directly with success but are unrelated to your knowledge of investing or financial planning.
Dan Solin is a fee-only investment advisor and a New York Times best-selling author of the Smartest series of investing books. His latest book,The Smartest Sales Book You’ll Ever Read, was just published. He consults with corporations and advisory firms on ways to improve their sales.
Read more articles by Dan Solin
