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Forget the Benchmark and Cut to the Chase

May 12, 2014

The typical investment conversation with clients revolves around words like “return” and “alpha.” But how about taking a more direct path to a discussion about how much money they will actually need in retirement?

Too many advisors are afraid of that five-letter word, said financial author Carl Richards at last week’s CFA Institute conference in Seattle, as reported by the Above the Market blog. Richards, who serves as the BAM Alliance’s director of investment education, told the audience that although money is what helps clients realize their goals, advisors often avoid speaking about it directly, because it stirs up so many emotions. But the most important part of an advisor’s job, according to the blog, is helping investors bridge the chasm between what their guts tell them to do in the face of turbulent markets and what they really should do to maximize their investments — the chasm Richards calls the behavior gap.

Above the Market summarizes Richards’ prescription for closing that gap. Perhaps the main message is to put process before products — the opposite of what too many advisors do. Talking about what the blog calls “real life” rather than about investing will keep clients focused on their long-term well-being. It will also help stop them from obsessing about the mostly useless financial information they get from television.

Another point in Richards’ keynote speech concerned advisors’ tendency to make things more complicated than they need to be. “Complexity is not a sign of talent or a marketing tool,” as the blog summed it up. Instead of worrying that prospects might consider a straight-talking advisor superfluous, practitioners should “offer elegant simplicity,” says Above the Market, concluding, “People will pay for that.”

By Murray Coleman