A high school teacher in Syracuse, N.Y., recently gained notoriety when he posted his resignation on his Facebook page. Jerry Conti’s lamentation about education—“I am not leaving my profession, in truth, it has left me”—immediately went viral.
The Westhill High School history teacher criticized school district pressures to focus on standardized testing, which he felt squelched a teacher’s autonomy and creativity—“it smothers the development of critical thinking in our students and assumes a one-size-fits-all mentality more appropriate to the assembly line than to the classroom,” he wrote.
One wonders to what extent financial advisors could lodge similar complaints. Not a few advisors have been driven from their wirehouse homes because their managers were imposing some Six Sigma-style standardization processes that interfered with the advisor’s ability to determine the relationship he had with his clients.
And even some independent broker-dealers have been known to smother their advisors with various schemes to streamline the financial planning process.
But to Paula Hogan, a Milwaukee-based advisor who has emerged as a genuine thought leader in the advisory business (having written and published articles on discrepancies between theory and the practice of financial advice), the focus should be on people, not portfolios.
That is not to say that Hogan advocates managing client relationships on an ad hoc basis. To the contrary, she uses a well-defined methodology called life-cycle theory (see cover story, “Investing for a Lifetime”) developed by financial economists such as Boston University’s Zvi Bodie.
Perhaps the key insight of this approach is that average results are not relevant to individual clients. If stocks historically deliver a 6% return above inflation, that’s cold comfort to an investor whose one and only portfolio loses a significant percentage at a time when he can no longer make up for the loss.
For that reason, Hogan emphasizes managing risk over managing return, funding priorities safely and investing more aggressively for low-priority goals.
Understanding those priorities is the relationship part of the equation, and this is something only intensive engagement with the client can yield—not a corporate Six-Sigma template nor the latest software innovation.
You may have the best technical solution to the client’s problem, but that client may be emotionally unprepared to adopt it. In such a commonplace situation, only a human relationship with the client will avail.
It seems clear that Jerry Conti felt that school district objectives competed with, and undermined, his desire to devote himself to his students. Advisors too should consider how extraneous pressures or false paradigms might undercut their clients, whose financial security is in their hands.