If you, or perhaps you have a child, that has been in almost any school system over the past twenty years, you must be keenly aware that there has been a distinct movement away from written tests to multiple choice examinations, where all a student does is fill in an answer box. Even some students—and probably parents, too—refer to these exams not as multiple choice tests, but as “multiple guess” exams, thereby implying that there is even less thought and analysis given to the exam questions than you might already have believed.
You see, when one is forced to write out an answer to a question, on the other hand, that person is forced to grapple with all sides of a particular issue, form a cogent argument, and put it down on a piece of paper in a way that communicates their point of view to the reader. That, my friends, is a real test (no pun intended) to see if someone actually comprehends a particular concept. It is really quite obvious too. So if it is, why has this been discarded in favor of multiple guess? This reason is also quite obvious, as it is simply easier to check boxes—for both takers and graders—than to write.
And while this box checking syndrome, as I like to call it, perhaps started in schools, it has become much more prevalent elsewhere. You’ll frequent overhear people explaining to friends the reason for their doing something or even going somewhere, was that they wanted to check that box of their list in life (as if there really was some end-all be-all list). Or, when someone applies for a new position, they often spend their application process checking boxes on the Internet about their background, rather than having to write out their reasons why they desire this new role. Or, ever been to a doctor lately? Some doctors simply check off boxes to see if someone’s test scores are all in a “normal” range, and pronounce them healthy, without ever giving effect of whether those boxes or ranges really make sense for the particular person.
While these are but a few of the examples that you might readily observe today, one of the biggest offenders of box checking, in my opinion, is the investment industry. Many financial advisors—a euphemism for sales person to be sure—blindly run through their checklist of questions when they meet with a client, check-off boxes on their list based on the clients response, and then pronounce that the client should have a little bit of everything from the firm (i.e. checking all of the investment product boxes) if they want to be fully diversified. Then they move onto the next prospect and do the same thing. And this is practiced far and wide, despite, in my opinion, being utter nonsense.
This financial advisor box checking, in effect, makes the client feel as though their unique needs are being met--as if unique can be fit into a box--and that the sales person cares more about them than selling product. But what it really is, though, is a systematized approach by many larger firms to simply gather client assets. And then both the advisor and the firm hide behind this diversification—a euphemism for average—mantra, so that the even though the client shouldn’t theoretically lose a lot, they flip side is that they shouldn’t make a lot either. It’s perfect for the advisor, the clients performance will be average at best--without including the enormous downward effect of fees--which means that the client will typically not get angry at any point, and decide to fire them.
But shouldn’t most clients aspire to have better than average performance over the long-term—net of fees? And how many people who were supposed to be fully diversified, have done even worse than those that weren’t diversified over the past year? And if someone has been sold—or I should say checked the boxes—on all the types of investment products a firm has to offer, how is this unique, and how can their “advisor” actually know the intimate details of each product, and more importantly, if it is actually appropriate for the client?
I think each client or prospect should ask their particular “advisor” to write a personal essay—in plain English, no less—which describes what they have learned about a clients personal financial and life circumstances, details why that “advisor” got in the business in the first place, explains to their clients what they actually do all day (probably cold calling), and finally describe the intimate details of each investment product and why it is appropriate for this particular client.
It is then, and only then, that a client or prospect can ascertain whether or not a financial professional actually knows what they are talking about, and has the ability to mentally grapple with the various issues in each person’s unique circumstances. Anything less, and it would probably be very apparent that these “advisors” are just product of what has happened to examinations in most schools. They are simply checking boxes to try and win a clients business.
I welcome dialogue with my readers, so please send me any questions and comments you have. Also, if you haven’t already done so, please be sure to sign-up for my free email alerts from BuffettInsights by emailing me at BuffettInsights@gmail.com.
Justin
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The content contained in this blog represents the opinions of Mr. Fuller. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business. This content is intended solely for the entertainment of the reader, and the author
