There’s No “We” in Investing, Just “I”

Investors do not want to jump to a rational conversation about facts and figures right away; financial advisers need to understand them on an emotional level first.    

This was a finding in a report published by  the Insured Retirement Institute (IRI) and Maslansky, Luntz + Partners examining retirees’ and pre-retirees’ attitudes about investing and the role of financial advisers.   

At IRI’s 2010 Annual Meeting in Chicago, a panel of 24 retirees and pre-retirees, between the ages of 50 and 74 from the metropolitan Chicago area, were shown a series of video messages about retirement, investing, and the role of financial advisers.   Participants used instant-response, hand-held devices to communicate their reactions to these messages, which Maslansky, Luntz + Partners gathered and published in their report.

When the same type of exercise was conducted at IRI’s annual meeting in 2009, Maslansky concluded that investors were in a “post-trust” mindset; they were skeptical about everything.  This year, the “post-trust” attitude is still strong, but a “recovery” attitude is making some headway.    

The report suggests that investors do not care about the big picture as much as they care about their personal stake in it.  Also, most advisers believe they do a very thorough job of educating their clients, yet clients still feel uneducated.  The report recommends “closing the gap” between going through the motions of investor education, and really making sure clients are getting it.   Advisers need to understand that investors these days are highly skeptical to anyone claiming to have a “sure thing,” and that the only certainty in markets is uncertainty.

To help advisers get a deeper appreciation and give them the ability to succeed in this climate, IRI and Maslansky have made several suggestions:

  • Be sure to listen to your clients and give them the most personalized investment strategy possible.  Maslansky says the problem most advisers have is not that their strategies are the same for all their clients, but they need to do a better job of communicating that one client’s strategy is truly tailored for that individual.   
  • When it comes to discussing “retirement income” or “annuities,” advisers should focus on the philosophy behind why those products may work, and not the products themselves.   Also, tell clients that an annuity should be a part of a well-diversified portfolio.
  • Many investors are continuing to be conservative with their money.  Yet one place in which they may be more aggressive is with “new” money; protect the bulk of their investments, but find one sliver of the pie to invest with aggressively.