Managing Wealth as a Scientist, Philosopher, and Psychologist

By Brian J. Cunningham, CFP®

There have been a few times during my quarter century as a private wealth advisor when my clients were likely to call asking “Should I sell?”. These calls usually occur when there is volatility in the markets and the media is suggesting we’re heading for a recession. That was certainly the case during 2008 when it seemed like every move caused a chain reaction, and every financial pundit was offering wildly different advice.

By 2009, that global financial crisis was officially over, leaving us all with an understanding of how it happened and how to avoid a similar financial disaster. For myself, I learned the power of patience and that there is a big difference between inertia and staying the course. I also learned from that “trial by fire” experience as a wealth manager that I needed to include some of the professional skills of a scientist, philosopher, and psychologist to best serve my clients, especially during times of uncertainty.

Flash forward to 2020 and the “Should I sell?” question is again at the forefront. Yes, we’re dealing with a pandemic, declines in certain industries, and a contentious election. But we are not anywhere near a 2007-2008 debacle. For those of us who weathered that storm, we are in a much better place to guide our clients and use the lessons of the past to plan a more stable future. Now more than ever, science, philosophy, and psychology are all integral to my consulting approach.

The Science of Investing

As a financial planner, I need to have extremely well-honed people skills to understand my clients and serve them in a way that inspires long-term relationships. To earn their trust, and to help my clients make the right portfolio choices, I must think like a scientist. In today’s world of complicated products, longer retirements, increasing inflation, and decreasing returns on certain investments, I use the most advanced tools and technology to constantly analyze and adjust my clients’ portfolios. Some of these tools I implement with them, like the retirement planning software that allows us to run “what if” scenarios on a range of variables.

Most of my scientific research is done without my clients even knowing about it. It’s a vital part of my job, but it doesn’t affect them unless I believe my findings might impact our investment strategy. During the past year, I’ve increased the scope of sophisticated tools and data sources that inform my advice. Whether it’s “stay the course,” or “let’s consider some changes,” my recommendations are always based on the objective scientific analysis, not the daily headlines.

The Thoughtful Philosopher

Every successful wealth manager I have known takes a philosophical approach to their investment strategies. Recommendations are based on science and the effective application of their philosophy developed throughout their professional careers. With 25 years of guiding my clients, I certainly do. But it’s not just my philosophy of investing that matters. I must understand my clients’ philosophies of life. I need to take the time and ask the right questions to find out my clients’ values, priorities, and goals. What is important to them now and how do they envision their future unfolding?

My philosophical approach to investing is best described by the tortoise and the hare parable. I work with my clients to develop plans that are sound, balanced, and above all, rational. I don’t seek out the latest “cool trades,” because they are getting financial media attention, and I never overreact to trends that seem to blow up out of nowhere. I am proactive. I will suggest an adjustment if an opportunity arises that will benefit my client over the long run. I never recommend a trade just for the sake of creating activity. You might be surprised how many financial planners don’t share my philosophy.

The Psychology of Investing

When I talk about being a psychologist for my clients, I am not at all implying that they need counseling for anything more than their financial planning. My contention is that I must understand their psychological profile, particularly as it applies to their sensitivity to risk, to develop plans that make them feel secure and confident. While age, net worth, earning capability, and lifetime goals all inform a client’s tolerance of risk, so do other more objective factors.

I develop plans for my clients that are designed to reduce their stress, fear, and anxiety about their financial future. My objective is to simplify, educate, and clarify my clients’ financial picture, not add complexity or difficulty to their lives. For most clients, planning doesn’t end with retirement. They are living their values now and planning how their legacy will continue through gifts to beloved family members, or organizations whose missions they support.

I communicate with my clients by analyzing and accommodating their comfort level on the frequency and depth of contact. Some clients I teasingly refer to as “financial junkies.” They want all the numbers all the time. It makes them happy and secure. At the other end of the spectrum, I have clients who have a very low threshold for too much information. A perfect example is a client I recently called who admitted to me he hadn’t opened his statements from for three months. I told him it was just as well because he might have panicked and asked me if he should sell. He knew that if there was anything to be concerned about or that would warrant a change in his investment strategy, I would have called him. And he was absolutely right. I was monitoring his plan, along with all my clients’ investments, throughout those three months, just as I always do. But he didn’t hear from me, and I didn’t worry about not hearing from him, because I knew he was confident that I’d call him at the right time.

Just as I strive to achieve balance for my clients with their investment strategies, I work to achieve a balance among the scientist, philosopher, and psychologist roles within my private wealth manager profession. I believe the most valid indicator of my success with achieving and maintaining this equilibrium is the longevity of my client relationships, and the number of referrals that they give me. Most of my new clients are a result of recommendations by those who value my role in their lives.