AROUND 100 people attended the CFP Retreat last week before theFPAConvention, for what was an “amazing day with exceptionally high quality speakers”, according to sources who attended.
With a behavioural finance theme, the day kicked off with a session from Trusted Advisor Associates’ Charles Green by satellite link from New Jersey in the US.
Green discussed how to gain client trust, and ways to develop client relationships ranging from the rational to the irrational end of the spectrum, which includes the expert-based, needs-based, relationship-based, and finally, trust-based phases.
According to Green, the formula for trust is quite simple — credibility plus reliability plus intimacy divided by self-orientation. When self-orientation is high, client orientation is low, and clients are left feeling like their advisers don’t care about them.
Green also described three myths about trust — that it takes time, that it is just about credibility, and that people only trust firms. He also said lack of trust is what kills most sales.
After a session by Peter Webb on emotional intelligence (seeMoney Management,October 9), Dr Keith Suter examined the “ethical storm”.
According to Suter, there are both internal and external incentives for greater attention to business ethics, including the fact that people prefer to deal with individuals they trust, that employees are more productive when they are working for a ‘noble cause’, and a new era of transparency fostered by high profile corporate collapses such as Enron and HIH.
Suter invited participation from attendees, who submitted questions and comments prior to the session. Ethical dilemmas in a financial planning context such as “investment recommendations being made with planner’s self-interest in mind”, “promising to do something for a client by a certain time when you know your time is fully committed”, and “being capable of justifying the ‘provision of service’ for the levels of fees charged” were among the issues discussed.
Finally, University of Chicago Professor of economics and behavioural science, Richard Thaler, conducted a workshop on behavioural finance in practice, focusing on the relationship between cognitive psychology and the economics of financial markets.
Quoting Isaac Newton — “I can calculate the motions of heavenly bodies, but not the madness of people” — Thaler says people are irrational, markets are not efficient, most people believe there is some middle ground between stock prices always equalling intrinsic value, and stock prices depend on market psychology.
