The Stories We Tell

I was talking with a few advisor friends recently, and one was lamenting about the difficult conversation he had had with a dissatisfied client over poor portfolio performance. He recalled how he spent some time agreeing with the client that the performance was poor but that they were investing for the long haul, not short term. I commiserated as I had been in those conversations before, and his words seemed right. But during our conversation, it occurred to me, that maybe he was wrong, and maybe I had been wrong in the past as well. Yes, we do design portfolios for the long term, keeping short terms needs in mind, but at what point do we decide that the strategy we have adopted may be wrong, or at least may need further exploration. 

Is it human nature, or is it just plain easier, to stick to our original stories instead of stopping and saying, “Wait just a minute?” Maybe this strategy that we had all the evidence on and believed in with our whole heart is wrong. Maybe there is new evidence that proves something different. At what point do we admit first to ourselves and then to our clients that we have researched the matter further and there is new evidence which suggests an alternative?

I have had my own reckoning with annuities. For years, I preached, yes, that is the correct word, preached against annuities. I thought they were high-commissioned investment products that were often “sold” to clients for all the wrong reasons. I wrote numerous articles on the pitfalls of these products and, in fact, one newspaper editor chastised me for continuing to slam this product. There were states across the country penalizing companies for unfairly taking advantage of senior citizens who were easy targets for these products. I sat proudly on my high horse, justifying my position.

Fast forward 15 years, and annuities have changed. There are now more products with lower costs. Further studies have shown where different types of annuities could benefit some retirees. I also started talking to more clients, where I could see a definite advantage to annuities for a portion of their retirement funds, including peace of mind. I had to eat my words. One of the problems was that I had so successfully preached against them, that when I would mention the possibility of using them in certain strategies, clients and colleagues would quickly retort, “oh, no, annuities are bad products.”

I had to change my story and admit why I was changing my story. I had done more research, the products had changed, and there were families where it made sense for an annuity to be part of their strategy.

The point of all this is that you want an advisor you can trust and not one who blindly continues to recommend the same strategy when information has advanced. You want an advisor to do their research and due diligence, but you also want an advisor who you can question, hard sometimes, and one who also questions themselves. You want an advisor who will eat their words, admit when they are wrong, and not just repeat the same convenient story they have recited for the past 20 years.