Humility in Advice

As our children crack open the books for the fall semester, grown-ups freed from the obligation from formal schooling nevertheless have much still to learn. One of the privileges of adulthood is that we choose from whom we will take instruction.

And that raises a fundamental question: What articles, books and thinkers will we choose to follow? There are lots of experts out there writing for financial advisors—be they portfolio managers, research analysts, investment columnists, even trade magazine editors. We can’t possibly keep up with all of it, so how do we make the cut?

The question takes on even greater salience when it concerns how we will manage our clients’ assets. Some experts will make a compelling case to invest in a certain way while others will make an equally convincing case to do something quite opposite.

One example comes immediately to my mind. In a field populated with clever people, this expert stands out for his brilliance. He knows his market history inside and out. He routinely references great financial and economic thinkers, applying their ideas to current market conditions. He seems to sift through all the relevant data and offer guidance as to what trends are most relevant to investors. He authoritatively exposes the policy errors that are adversely affecting our economy at the macro level and, at the micro level, his investment recommendations seem eminently reasonable.

And yet despite all this, it is impossible not to notice how consistently wrong this guy has been. Had you followed his investment recommendations, you and your clients would be quite unhappy. The world was supposed to have come to an end for some time now and it still has not happened, despite his sophisticated evidence. Being “right” too early could be disastrous for your portfolio.