Going Through Mountains

Posted by: Joseph Kuo | December 10, 2021

If you needed to get to the other side of a mountain, how would you do it?

If you needed to get to the other side of a mountain, how would you do it?  Most people would carve out a tunnel by sending in a small army of workers with hammers and chisels, or use explosives to carve out a tunnel. Difficult and costly, but you’d eventually grind your way through.

Or, you could accept that the mountain is there, and then go around it or avoid it altogether.

When I first started advising clients, I found myself quickly jumping in with the “right” answer  when I saw them doing financial things that I knew were wrong, or that would lead to future regret. It seemed the obvious thing to do. After all, that was my job description, I had the knowledge and background, and one of the reasons I became a financial advisor was to use my expertise to help others.

Drilling Through The Mountain

With that direct approach, the results actually varied widely. Many of those conversations had a tendency to turn into “yes, but” debates of why something wouldn’t work or that I didn’t understand the situation completely. In the end, both of us often felt unheard and that we’d just wasted our time defending our perspectives. In extreme cases, the client would even do the opposite of what I had recommended.

I had a client with a large amount of ESPP stock in his employer. I advised the client that although his company was doing well in the stock market, it would be good to lock in some of the gains and diversify his investment portfolio. The client pushed back saying that he would be missing out on his company’s gains, and that he could always diversify later. We went back and forth with me trying to make the case for diversification and him trying to convince me that his company’s stock was still one of the best investments on the market. Neither of us made any headway and the client just kept buying shares in his own company.

Eventually, he did sell some of his shares because he “felt guilty about not listening to my advice”, but did so in a way that incurred a large tax expense. By the time he told me during tax return season the next year, it was already far too late to mitigate the taxes on his sales. In this case, our disagreement not only went unresolved, but led to a breakdown in communication with costly results.

Other times, the client did seem to listen and agree, but did not follow up with meaningful action. I took on an client who wanted to retire in five years. With this client, I recommended a disciplined approach and created a savings and spending plan, which the client reviewed and approved.

However, after several months, there was very little progress and the client was still spending at previous levels. So I had a few follow up conversations with the client. Turned out that in order to retire sooner, she had switched to a higher paying job, but this higher paying job came with a lot more stress. The net effect was that she was spending more money every month to alleviate the job stress from the higher paying job. I resolved the issue by working with the client to find some less costly ways to alleviate stress, and had her choose the ones she liked the best.

Approaching the Mountain

The scenarios I described above may seem surprising, but we all have a tendency to want to defend our personal viewpoints. Nobody likes being judged and told that they are wrong. In discussions where I focus on convincing the client of my position, there was a definite tendency for everyone involved to guard their own identity and assert their autonomy. The discussion became an attempt to drill through a mountain.

What I’ve learned through experience is that now before formulating my advice and recommendations, it’s important to first recognize and accept my clients for who they are. Instead of only asking a client what they’d like to avoid, make sure that the conversation includes finding out what they do like.  Accept that there’s a mountain there, and see if there’s a way to avoid the mountain altogether.

Instead of trying to convince them to take the path you know, find a path that fits in with them. Then they no longer need to defend who they are. We shift the focus from “who’s right” to “what’s right”. Once they are more comfortable and out of defensive mode, they could be more inclined  to consider different possibilities and perspectives.

This doesn’t mean that we have to agree with or condone the other person’s beliefs or viewpoints. It means instead that we sincerely accept that they believe as they do and we don’t try to make those beliefs wrong. In that instant, we can ask for permission to share our perspectives and see how they feel about our insights.

Ultimately, my duty as a financial advisor is the success and well-being of my clients, and to also give them the means to make decisions that align with their personal viewpoints and values. Neither of those goals are possible if my clients are not receptive to my message and how I communicate it. When we present our insights in a way that acknowledges client viewpoints, we are more likely to be heard and accepted. We must honor and respect that everyone is in control of their own lives and get to decide what they will do. We can then avoid the mountain completely and get to where we need to go. And that’s the real goal.

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