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Return on Relationship

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Market intelligence was once expensively acquired. The acquirer would be a portfolio manager working in an oak-paneled corner office with a grand view of the Manhattan skyline or Boston Harbor. Then the Internet democratized access to information such that today, highly sophisticated market research in every conceivable area is available instantaneously and for free. Makes you wonder what institutional investors are paying for, though a government probe into expert networks relied on by many hedge funds suggests illicit insider information may be the only intelligence worth buying.

But, aside from the unfair advantage sought by cheaters, you’ve got to wonder how important all this market intelligence is. There are financial bloggers who post brilliant stuff from before dawn to late at night. Unless you’re a professional day trader, you couldn’t get through a fraction of this stuff. Financial eminences with their nifty technical charts and Trader’s Almanac-quality data give the impression that their authors are brilliant.

But it doesn’t take a lot to look smart in a bull market. When the reversal comes, a lot of brilliant people will be exposed as not actually omniscient. You see, the financial commentariat are professional entertainers. They seem clever, but few and ephemeral are the winning streaks of those whose buy and sell decisions are public record.

And so it will turn out, as it always has, that chasing the latest bit of market intelligence will provide little investing advantage to compensate for the hours spent in Barron’s, in the blogosphere and in front of CNBC. Indeed, this can damage client portfolios by encouraging risky trades rather than setting a principled investment course and patiently sticking with it.

As Michael Wincek of Wells Fargo Advisors — quoted in this month’s cover story — puts it: “If you think you’re going to be a trader and stay in this business, you’re not. You’d better develop relationships with your clients.” Wincek is right. So many people invest so much IQ into chasing an inscrutable market. What they have gained slips through their fingers like fine grains of sand. Wiser financial advisors would do well to invest their EQ into relationships built to last.

That is the message the financial-life-planning movement has always stood for. Mitch Anthony, one of its leading lights, learned the real impact of money in his early work in suicide prevention among Midwestern farmers who bet the farm — and lost the bet. All advisors have some clients who need a little talking off the ledge from time to time, and others who need to be coaxed to take on more risk than they’re comfortable with. Only an advisor who has built a strong, trusting relationship with the client can accomplish this. Indeed, the ability to move the client through difficult life passages is where an advisor can impart real value.

As Raphael Lapin, our Client Relationship columnist, often points out, client relationship skills can be taught and learned with immediate practical benefit to the advisor and client. Advisors: For real returns, invest in the relationship.

Gil Weinreich

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