How advisers can explain investing done right

Shift from focusing on investment returns to talking to clients about their goals.
SEP 28, 2016
By  crichards
Investing done right doesn't match up very well with what people see and hear in the news. When it sounds like the pundits are talking IN ALL CAPITAL LETTERS, investing seems so exciting. Who wouldn't want to own a hundred shares in a company that's on the verge of being the next big thing? Of course, you should toss aside your carefully constructed plan for the excitement of being in on something amazing. As a real financial adviser, I'm betting you've had this conversation once or twice with a client or two. And in our role, we have the tough task of explaining that investing done right is, well, boring. So how do we get clients excited about being bored? (More: The value of real financial advice) One of my favorite examples involves the process of planting a tree. Imagine we plant the seed and every day we dig it up. The tree will never take root and remain small and boring. It's only after one year, five years, a decade, two decades, of leaving the seed alone that we'll really see the benefits. The same holds true for investing. Compound interest is another great example. It's sort of flat and very boring in the beginning, but those last two or three doubles are super exciting. But to get to long-term exciting, people need to take a trip through short-term boring. I've also found it helpful to shift from focusing on investment returns to talking to clients about their goals. Even if the short-term investment results are underwhelming (or boring), there's still great (and exciting) conversations to be had about where they stand with their goals. (More: How advisers can effectively talk about risk with clients) Plus, if a gap exists between where they want to be and where they are, you get to help them close that gap. If things are going great and they're right on track, you get to say, "See? The things most important to you are happening. You're doing exactly what you need to be doing to get where you want to go." And isn't that exciting? Carl Richards is a certified financial planner and director of investor education for the BAM Alliance. He's also the author of the weekly "Sketch Guy" column at The New York Times. He published his second book, "The One-Page Financial Plan: A Simple Way to Be Smart About Your Money" (Portfolio), last year. You can email Carl here, and learn more about him and his work at BehaviorGap.com.

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