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Humility in Advice

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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.

There are many such brilliant analysts, and here’s the quickest way to weed them out: Eliminate the arrogant ones—probably most of the lot of them. Smart people know they’re smart and often succumb to that character flaw. But since pride comes before the fall, and you don’t want to fall, you need to find guides who are brilliant but humble.

The simplest way to weed out the arrogant is to discount any expert who makes predictions. The world is too complex for any individual to meaningfully grasp its future; the analytical power just isn’t there.

A humble approach would consist of warnings rather than predictions. A wise thinker will advise what to watch out for and will admit to factors that might mitigate the trends he observes.

There is yet one more way to narrow your rapidly dwindling list of experts: A wise advisor not only sees potential hazards but has a positive and clear vision for the good that our economy or your portfolio can achieve. Such an advisor sees more than just the pitfalls ahead but has a realistic view of what you can hope for, and the steps you should take to get there.

Come to think of it, that’s not only the sort of expert you should be reading but the kind of advisor you should be to your own clients.