This Bias Impedes Your Success

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As advisors, you’re familiar with biases your clients have that impair their ability to be successful investors. There are at least 10 such biases and probably more.

Your ability to identify those biases in others is value added.

But your inability to recognize the biases you have prevents you from managing a more successful practice.

A flawed assumption

Advisors who consult with me share several traits.

The most prominent one is competence. I rarely meet an advisor who I wouldn’t retain to manage my own finances. Almost universally, they are highly trained, often holding advanced degrees and certifications that are meaningful (Ph.D, MBA, CFA®, CFP®, among others). A surprising number are also CPAs.

Here’s a belief most of them share: Competence is the most important trait clients consider when deciding who to retain.

This assumption is flawed. It’s contradicted by many studies. Warmth trumps competence.

The problem with persuading you to abandon primary reliance on your competence is this: You don’t want to hear it. It’s not something you are comfortable discussing. You find it much easier to retreat to a discussion of the nuances of investing, or behavioral finance, or the benefits of financial planning.

When I tell advisors we need to focus on making them more likeable, they’re uncomfortable.

Selective exposure bias

“Selective exposure bias” is when you “purposefully select information, and avoid exposure to information, in such a manner that one’s attitudes, beliefs, and behaviors are supported rather than challenged.”

Selective exposure bias exists in many areas, but is particularly vibrant for political issues.

It’s likely selective exposure bias keeps you from understanding why your conversion rate is lower than it should be, despite your high level of competence.

Examples of selective exposure bias

Here’s an example of how selective exposure bias can quite literally kill you.

One study (discussed here) found bad diet, inactivity, smoking and drinking alcohol are among the causes of up to 90% of cancers. That’s not a typo.

Try telling someone you love to change their lifestyle by showing them this study. They’re likely to ignore it and make no adjustments.

Here’s another example that strikes closer to home.

Look at your website.

Most websites I review are text dense, with a massive amount of information. If your website could talk, this is what you would like it to say: We’re so competent. Hire us.

These websites are written based on the assumption that people read websites like they read a book – from cover to cover.

They don’t.

Extensive research shows visitors scan your website, reading at most 28% of the words during an average visit, with 20% being more likely

Other studies provide more information about how users actually navigate your website.

Did you know:

Users scan the main sections of a landing page and decide whether they want to stay or move on in as few as three seconds.

If they decide to stay, they focus mainly on what’s in the top part of the screen.

Why are you writing text no one is likely to read and putting it on your website?

More AUM. Better Relationships.

Guaranteed

My micro-learning course will increase your AUM and deepen your relationships.

If not, I’ll give you a 100% refund of the $29.95 cost.

Volume discounts are available.

More Information

Here’s the full text I used recently to describe the investment philosophy of a client:

We follow sound academic principles of investing, primarily using funds managed by Dimensional Fund Advisors and Vanguard.

For those who want more information, I provided links to articles and a video.

I made a similar recommendation to others and showed them the research. They rejected my advice and opted instead for an extensive discussion of the merits of evidence-based investing. When I checked Google Analytics, I found the average time spent on that page was 15 seconds or less.

Refusing to consider evidence that contradicts a strongly held belief is a bias. Can you overcome it?

Dan trains executives and employees in the lessons based on the research in his latest book, Ask: How to Relate to Anyone. His online course, Ask: Increase Your Sales. Deepen Your Relationships, is currently available.