Critics of the financial services industry frequently remind consumers that financial products are typically “sold” rather than “bought,” and implore them not to fall into that trap. The idea is that there is no enormous outcry on the part of consumers demanding to buy financial products. Instead, they are “sold,” pushed upon a consuming public that doesn’t understand them or – perhaps – even want or need them. Instead, the alleged basis for their continued vibrancy and ongoing usage is that financial advisors get paid big bucks to sell them.
It’s like flirting with the disinterested.
Sometimes those critics are right and consumers should remain disinterested. Indeed, it’s healthy for consumers to remember the interests of advisors they may be working with and – carefully! – to check their work and analysis. Far too many of them do not look out for their clients’ best interests.
However, the claim that because people don’t naturally flock to buy something on their own means that it’s dangerous and bad for you simply doesn’t hold up. People buy all kinds of terrible-for-you junk food in record amounts, while the fresh vegetable section of my supermarket is never crowded. Literary classics are a tough sell (Marilynne Robinson’s classic Pulitzer Prize-winning Gilead sold only 345,000 copies), while “popular” fiction sells exponentially more (The DaVinci Code sold 60 million copies), and porn is a multi-billion dollar business. Local symphonies are struggling to stay afloat while Justin Beiber could support several many times over.
What is good for you and things that have enduring or intrinsic value are sometimes a tough sell. But they are still good and good for you. Sometimes the stuff we want would be better avoided and the really good stuff needs to be sold. If you don’t believe me, maybe you will believe Steve Jobs.
“A lot of times, people don’t know what they want until you show it to them.”
Or how about the Nobel laureate, Daniel Kahneman? In one of the more influential papers of all-time, Kahneman and his colleague Amos Tversky developed “Prospect Theory” as a way to make sense of decision-making. The summary of the paper is, in short, that humans do not make optimal decisions, which normative (“should”) frameworks suggest.
All too often, we don’t do the things we should and do things we shouldn’t.
This doesn’t mean, of course, that businesses should not listen to their customers or that advisors should not listen to their clients. In the financial world, not listening to clients is a huge problem. Too much financial “advice” is about pitching what a salesman wants to sell rather than listening for and to a client’s dreams, aspirations, goals, circumstances and problems, and then going about creating a way to get where they want and/or need to go. Sometimes the best advice won’t be what the client wants to hear. Sometimes it will include an approach that the client had never considered. Sometimes it will need to be sold.
Ultimately, a financial advisor’s job is to provide clients what they need – not just what they want – even if they aren’t interested in it. There are plenty of supposed “advisors” who will erroneously sell their clients what they want and be richly compensated for it. Sometimes doing what’s best for clients – providing them with what they truly need – takes a great sales job (and that’s not a bad thing at all).