As an adviser, I often feel pressure to project certainty. After all, isn’t this what financial planning is supposed to provide? Humans naturally avoid doubt and will pay to reduce it – an instinct shaping our financial system.
It’s tempting to believe that, as an expert, your opinions should be firm and unambiguous – that there is a definitive answer to every question. But this mindset is a trap. It can get advisers into trouble and, more importantly, fails to serve the clients we are trying to help.
I see this thinking all too often on social media. Some advisers talk about investing as if outcomes are pre-determined. They seem to believe that, after roughly a century of semi-reliable data, we have complete knowledge of the world and that future market returns can be wholly captured by a neat probability distribution.
The result? Some dismiss investment risk as mere volatility, promote overly aggressive portfolios and focus solely on keeping clients in their seats. Ironically, these are the same advisers who present themselves as experts in behavioural finance, citing psychological biases like overconfidence and the Dunning–Kruger effect.
Complex multi-dimensional decisions are boiled down to binary yes/no answers, stripped of nuance or caveats
These biases also manifest themselves in financial planning, specifically cashflow modelling. Barely an hour goes by without an adviser posting about the life-changing impact of their forecasting expertise. Don’t get me wrong, I’m generally pro cashflow modelling. But I instinctively recoil at the self-confidence of these proclamations.
Complex multi-dimensional decisions are boiled down to binary yes/no answers, stripped of nuance or caveats. Advisers describe the thrill of giving clients ‘permission’ to do things – be it early retirement or even whether they can afford to go on holiday.
Acting as a gatekeeper for these types of decisions is not a comfortable place for an adviser to be, and certainly not a position I’d like to find myself in.
Perhaps attitudes within the profession reflect how our wider understanding of risk has been simplified in the post-war era. Economists like John Maynard Keynes and Frank Knight once drew a clear distinction between measurable/resolvable risk (closed-form problems with known outcomes and probabilities, like roulette) and true uncertainty: “About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.”
Dan Wiltshire: How a bumbling demeanour can help win over clients
Given the inherent complexities involved with financial advice, I’ve concluded the best we can do is to help clients understand the broad financial parameters they’re working within to develop a reasoned framework for making informed decisions.
Similarly, when it comes to investing, our role is to offer defensible recommendations supported by the evidence we have available, recognising that no portfolio is perfect.
This often means providing hedged responses to client questions and difficult conversations about trade-offs and unknowns. At the time, this might not be what the client wants to hear. But they will know deep down that uncertainty is an unavoidable part of life.
No amount of expert analysis or sophisticated modelling can change this. Later, they will appreciate the fact you’ve respected their intelligence, and you won’t have to carry the tacit responsibility for every financial decision they make. This is not what financial planning is supposed to be.
Dan Wiltshire is an independent financial planner at Wiltshire Wealth
