Continuing with our behavioral theme this week, and with the upcoming holidays a good time to curl up with a good book, I thought I'd bring up an interesting insight from the granddaddy of American behaviorism. No, I'm not talking about B.F. Skinner, the classic 20th century behaviorist. I'm referring to a different and (two centuries older) B.F. - namely, Benjamin Franklin.
In his classic autobiography, the founding father writes:
…mere speculative conviction that it was our interest to be completely virtuous, was not sufficient to prevent our slipping; and that the contrary habits must be broken, and good ones acquired and established, before we can have any dependence on a steady, uniform rectitude of conduct."
Franklin understood that proper goals (bear this in mind before your New Year's resolutions) are insufficient; rather, actions that bend your behavior toward the proper goals until they become ingrained are the key. Read the book to learn how he endeavored to inculcate 13 virtues, including #5, frugality: "Make no expense but to do good to others or yourself; i.e., waste nothing."
Earlier in the book, Franklin makes an important related point that experienced advisors surely know - that there is a money personality established before the investor walks into the room. He writes:
Influence upon the private character, late in life, is not only an influence late in life, but a weak influence. It is in youth that we plant our chief habits and prejudices; it is in youth that we take our party as to profession, pursuits, and matrimony. In youth, therefore, the turn is given; in youth the education even of the next generation is given…"
Consciously or unconsciously, we act as we were trained to act unless and until we work hard to break those habits. Advisors need to acknowledge that particular elephant in the room - the client's upbringing - before devising a path toward the kind of saving and investing needed to reach the investor's financial goals.
Please share your thoughts in our comments section, and herewith some links of interest for advisors:
- Linda Rittenhouse, J.D. offers insight on the current status of the DOL fiduciary rule and its possible future.
- And John Lohr looks at other regulatory changes coming down the pike for advisors.
- Kevin Wilson is concerned with extreme valuations.
- And so is Ronald Surz.
- Jeff Miller has the scoop on Wall Street strategists.
- For more content geared to FAs, click here.