Sunday Email - Human Relationship / Lessons From Gaming

Read time: ~ 6.35 minutes

Happy Sunday!

Every Sunday I offer strategies for the week ahead and a thought to fuel your action.

I’m struggling with the polarized nature of the world we have today. 

Finding one's voice in the world today often means aligning with extreme viewpoints. Middle ground, it seems, is misconstrued as a lack of conviction or even intellect. 

This trend towards extremism is particularly pronounced when we consider the landscape of pessimism and optimism, where the former often commands immediate action and the latter, a steady course. Morgan Housel illuminates this dichotomy eloquently: 

“Pessimism requires action, whereas optimism means staying the course. Pessimism is "SELL, GET OUT, RUN," which grabs your attention because it's an action you need to take right now. You don't want to read the article later or skim over the details, because you might get hurt. Optimism is mostly, "Don't worry, stay the course, we'll be alright," which is easy to ignore since it doesn't require doing anything." (Morgan Housel, Why Does Pessimism Sound So Smart?)

Within our sphere—the wealth management industry—this polarization becomes a personal struggle. 

On one hand, there are alarming predictions about AI's potential to disrupt sectors and the entire labor market (like this video that had me annoyed). 

These types of predictions incite fears reminiscent of past technological advancements (i.e. email, internet, telephone, etc)  that failed to materialize as predicted. History constantly teaches us resilience; humanity's ability to adapt is unmatched, making these forebodings less about progress and more about capturing attention.

As Bob Iger says “pessimism leads to paranoia, which leads to defensiveness, which leads to risk aversion.” 

Conversely, the notion that our industry remains impervious to change induced by AI innovation is equally ridiculous. 

Our firm started 28 years ago and at that time we couldn’t imagine a world where trades would be $0 (we were paying $50 per trade) or a world where we could access portfolio balances real time (rather we had to call Schwab to get these). Or a time when stocks would trade in pennies, not fractions. 

The reality of our future is actually more boring. It’s the middle. It’s centrist. 

My conviction remains that AI will undoubtedly transform our landscape, but the essence of human financial advisors will persist, driven by our intrinsic need for human connection. This need, rooted deep in our evolutionary past, underscores our preference for human guidance, especially in times of uncertainty.

AI is set to redefine our functions, making our roles more efficient yet distinctively human at its core.

Thus our best action forward is not to worry or react, rather to double down. To double down on our moat, the human side of our business. 

As we navigate through historical market booms and the rise of alternatives like robo-advisors and greater access to information, the enduring preference for human advisors during periods of uncertainty speaks volumes. It's a testament to our evolutionary instinct to seek safety in numbers, a trait that has safeguarded our survival through millennia.

Over two of the more volatile market periods, we saw individuals were searching more actively for financial advisors during these periods. 

In February of 2020, 1 month prior to our country locking down, searches on Google for financial advisors spiked. And in July of 2022, as the S&P was down 19% YTD, another major spike in searches for financial advisors. 

In times of worry, humans search for answers from other humans. We revert to our evolutionary selves. 

Science has also shown that going through things alone has major negative effects on decision making, emotions, etc. 

Neuropsychological insights reveal that loneliness can impair executive function, our ability to plan, organize, initiate, self monitor and control one’s responses in order to achieve a goal. 

Doing things alone inhibits our ability to act and control emotions… two critical components needed to reach optimal outcomes. 

Reflecting on life's vulnerabilities—from infancy to our twilight years—the constant is our reliance on human support. This inherent need shapes our decisions, reinforcing the value of relationships in navigating vulnerable times. And money and our financial future tends to make us vulnerable. 

As we contemplate the future of wealth management, our greatest asset lies in the relationships we nurture with our clients. It's these relationships, characterized by a sense of belonging, emotional support, self-awareness, and expanded viewpoints, that form the bedrock of our industry's resilience and distinction.

• Sense of belonging: Think back to our school days… we found solace in knowing that we had a group of friends or a social circle. This protects us from loneliness and gives us a greater purpose. Going at things with others is more fulfilling than doing it alone. 

• Emotional support: Ever been in a situation that left you frustrated, then had to spend an hour in a car alone? Your mind starts brewing. The narrative gets more upsetting. But then, when we talk it out we feel better and sometimes even see where our thinking is silly. Without relationships our emotions go unregulated. 

• Self awareness: By interacting with others we gain awareness. We see what words / actions worked, what didn’t and where our emotions were higher than others. This awareness is necessary for personal development. 

• Expanded views: Without relationships our view of the world is defined, solely, by the experiences we have had. Relationships allow our knowledge sphere to grow via others experiences. Humans are naturally seeking answers, the best way to navigate towards this goal is learning via others. 

Each of us can point to the situation where we felt lonely and made that less than optimal decision via an Amazon spending spree. Or where our emotions took over and we took an action we later regretted. Or when we proceeded down a path without talking to others and misstep, a misstep that would have been avoided with one conversation. 

Relationships help to drive more optimal decisions. And despite our biases, we are constantly in search to maximize our outcomes. 

To enhance these relationships, we must focus on fostering a sense of community, empathetically managing emotions, ensuring consistency in our interactions, and providing well-reasoned advice. This approach not only strengthens our bond with clients but also reinforces our irreplaceable role in their financial wellbeing.

• Help clients feel a part of something bigger: Find a way to create a sense of community with you and the firm. Clients connect to a greater purpose (a “why”). Have this and ensure it is instilled in all client interactions in some way. 

• Regulate, don’t dictate emotions: Help be that trusting resource that clients feel comfortable coming to and sharing their emotions. Be the resource that is empathetic, that asks questions and is just a lending ear. Listen to hear, not to fix. 

• Be consistent: As human beings we yearn for consistency in experience. We don’t like change or uncertainty. Make sure that clients have a consistent experience with everyone and every aspect of your business. 

• Provide answers with rationale: It’s important to have conviction on your recommendation, but as humans we also want to know where this came from. We are not great with black boxes. We like transparency, provide understandable transparency to decisions. 

Our jobs are not going away. The human will always be needed in the servicing of clients and their money. 

Humans are naturally attracted to other humans in times of vulnerability and this will not change independent of the technological advancements that will certainly impact our industry and lives. 

But to ensure we aren’t disrupted, we must accept the fact that technology will change things. And we must double down on the human side. This means supporting our clients, not just directing them on what to do for their financial plan.

A Thought To Ponder This Week

Have you ever played a video game?

We get engulfed in the game. Constantly finding it challenging to put the controller down.

We are curious to see what happens next. We have autonomy in action.

And we get instant feedback on our actions, without judgment of others.

Games can be highly addictive for these reasons. They lead us to continue to act and do.

At the game's root is a plan (behind the scenes) that walks us through stages where we must take the appropriate action to move to the next stage.

A financial plan is a plan that walks clients through the necessary steps to reach their desired financial freedom.

However, financial plans lack the motivation for continued action like games do.

Maybe gaming can teach us something that we can implement to help push our clients toward continuous action.

Which will ultimately result in their desired financial future.

As we tackle this week, what is one element from games that we may be able to implement into our planning process to spur more significant action by our clients?

The best is ahead!

-Matt