Many years ago, I wrote an article in this same column that was based on the documentary movie “Food Inc”. Director Robert Kenner lifted the veil on the food industry, exposing often shocking truths about what we eat, how it is produced and what the cost to our health is. In the bid to produce food faster and at a higher profit margin for a world that is growing to be fast food nations, farmers who are funded by big investors use methods to rear animals and grow vegetables, grains and fruits that produce food fast but can be harmful to our bodies. I drew a parallel to the financial services industry back then. In the pursuit for faster revenue, financial institutions hire advisers en masse, rolled out processes to close a deal fast, all these at the expense of quality advice. Sadly, more than a decade later, things don’t seem any better. How so?
Again, the desire to be fast, often aided by technology is the culprit.
When I first started out as an adviser 22 years ago, advisory learning was largely through an apprenticeship model. Because there was no internet for us to gain knowledge, advisers learn slowly through some classroom lessons followed by numerous occasions where we observe how our “master” gives advice. We were also asked to apply our learnings in real jobs situations before progressing to the next stage of learning. The knowledge accumulated kept in step with the experience gained. It was a tedious process. But it produced advisers who did not just have the head knowledge but real experiences to internalise and appropriately apply it. Today, the time taken for a client adviser to grow in knowledge has greatly reduced due to the presence of the internet. Not only can virtual learning happen on demand, 24 hours a day, but advisers can also search for archives of information online. Technology has compressed time to fast-track the accumulation of knowledge. Not that this is bad. Just that experience gained could not keep in pace with the knowledge attained. And quoting Dr Joe Dispenza, a NY Times bestselling author, “Knowledge without experience is merely philosophy while experience without knowledge is ignorance. There’s a progression that has to take place. You have to take the knowledge and live it – embrace it emotionally.” Technology may have produced many overly confident advisors who give advice that may be theoretically right but lack wisdom which can only come from experience over time. I have witnessed it many times on finance social media sites.
The advent of robo advisors has allowed investors to go online and within minutes, developed an investment plan, opened an account and start investing without even the need to see a human. The benefits are undeniable – lower cost and fast. But the thing that investors may not realise is that money decisions are simple yet complex. Experienced wealth advisers know that while there is nothing complicated about answering some risk profile questions and creating portfolios of equities and bonds, the considerations in answering those questions go beyond just logic. This is because we all have a relationship with money that sometimes we don’t even know, and that relationship affects the way we make money decisions. As an example, if you have witnessed how investing in the stock markets has caused your parents to break up, that primal wound in your heart will affect how you make investment decisions. And there are also deeper life questions such as your purpose in life, your life goals (not financial goals), your value towards money that will influence the way your money should be managed. That is why we don’t believe in speed when it comes to building a retirement plan for clients. How can something that will affect you for the decades to come to take minutes to build? In our firm, we have to ask up to 60 questions over one 2-hour meeting as well as discussions spanning at least 6 weeks before building the initial plan for the client. And over the course of our relationship with clients, we continue to refer to those answers that the clients have given us as well as changes to clients’ current life to help clients make adjustments to the plan. Robots don’t understand these things and technology sometimes trivialized them.
The other thing that troubles me a lot these days is the mindset of the new breed of technopreneurs. In the past, entrepreneurs start businesses to fulfil a passion, improve the lives of others, meet a need or simply because they hate working for others. Many of them work in their businesses for a long time. Today, many start-up founders start businesses with an end in mind – to exit as soon as possible with a good valuation. At the start of the venture, founders talk about how much valuation they hope their businesses will be in 3 to 5 years. As a result of this mindset, products are built to scale fast to gain market share quickly, at times at the expenses of advisory quality and ethical considerations and many times at the expense of profits. So, these businesses burn cash year after year. And they seek rounds and rounds of funding from venture capitalists (VCs) who want you to grow and exit fast thus adding to the vicious cycle. Serial entrepreneurs (starting and selling businesses fast) are well respected as businesses are looked upon as an object for profit for shareholders and not to serve the long-term interest of clients. Don’t get me wrong, I am not against exiting from one’s business. But this is not how early entrepreneurs used to think at the start of their businesses.
Diamonds are formed from pure carbon sources. The temperature should be around 2200 F and at about 725000 PSI. While it is difficult for scientists to understand how long diamonds take to be formed naturally, everyone agrees that they can only be formed under intense pressure, heat over a very long time. Thus it is very difficult to replicate the conditions required for natural diamonds to be formed in labs. So just like diamonds, you cannot short circuit the process of making a good adviser, or making good money decisions to enable your life purpose and goals or build businesses that are sustainable, responsible and ethical. They can only be done through the passage of time. So in a world that seems to value speed, slow down for just like making a good bowl of soup, use all the technology you need, but go for the slow boil.
The writer, Christopher Tan, is Chief Executive Officer of Providend, a Fee-Only Wealth Advisory Firm. Besides being financially trained, he is also an Associate Certified Coach with the International Coach Federation.
The edited version has been published in The Business Times Weekend on 29th August 2020.
For more related resources, check out:
1. Why Your Initial Financial Plan Is Guaranteed To Change
2. Let Your Financial Decisions Enable Your Life Decision
3. Don’t Be Victim To Wealth Management
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