Personal Benchmark was Made for Days Like This

Crosby_2015Dr. Daniel Crosby, Executive Director, The Center for Outcomes

Chuck Widger and I released our New York Times bestselling book, Personal Benchmark: Integrating Behavioral Finance and Investment Management, on October 20, 2014. Although the book was published in 2014, the writing process began in 2013, and Chuck’s original idea for a goals-based investing system is much older still. Both 2013 and 2014 were great years to be invested, with the S&P 500 returning 32.39% and 13.69% respectively. But although Personal Benchmark was crafted in a time of prosperity it was created with an eye to days just like today.

What is needed during times of fear is an embedded solution that helps clients say “no” to short-termism and say “yes” to something bigger.

As we wrote in the book, “While investor awareness and education can be powerful, the very nature of stressful events is such that rational thinking and self-reliance are at their nadir when fear is at its peak.”

Financial advisors do their clients a great service by educating them about investing best practices, but at times of volatility, logic is often thrown out the window. What is needed during times of fear is an embedded solution that helps clients say “no” to short-termism and say “yes” to something bigger.

When presented with an extremely complicated decision, it is human nature to seek simplicity, something psychologists refer to as “answering an easier question.” Rather than deeply consider and weight the relative importance of social, economic and foreign policy positions, voters tasked with choosing a Presidential candidate tend to instead answer, “Do I like this person?” Confronted with a complex dynamic system like the stock market, the easier question that we ask ourselves is, “Am I going to be OK?” Part of the power of the Personal Benchmark solution is that it helps clients answer this important question in the affirmative.

bookOur book discusses the human tendency to engage in “mental accounting”, the psychological partitioning of money into buckets and the corresponding change in attitudes toward that money depending on how it is accounted for. Page 154 features the story of Marty, a Philadelphia-area gang member who separated his money into “good” and “bad” piles depending on whether it was honestly or ill-gotten. Marty would tithe to his local church using the good money, but reserved his bad money for reinvestment in his criminal pursuits. Although we are hopefully all more civic-minded than Marty, we are no less likely to label our money and spend, invest and think about it relative to that label. One huge advantage of Personal Benchmark the solution is that it sets aside a dedicated “Safety” bucket for days just like today. When a client asks herself, “Will I be OK?” she can take comfort from the fact that her advisor has accounted for her short-term needs. Being comforted in the here-and-now, she will be less likely to put long-term capital appreciation needs at risk.

“While investor awareness and education can be powerful, the very nature of stressful events is such that rational thinking and self-reliance are at their nadir when fear is at its peak.”

Besides helping clients say “no” to short-termism, Personal Benchmark also helps advisors paint a more vivid, personalized picture of return needs. Page 203 of Personal Benchmark tells the story of Sir Isaac Newton, who lost a fortune by investing in what we now refer to as the “South Sea Bubble.” Newton invested some money, profited handsomely and eventually sold his shares in the South Sea Company. However, some of his friends continued to profit from their investment in South Sea shares and Newton was unable to sit idly by and watch people less gifted than he accrue such fantastic wealth. Goaded on by jealousy, he piled back in at the top and lost almost everything, saying after the fact, “I can calculate the movement of the stars, but not the madness of men.” Newton’s failure is a direct result of anchoring his benchmark to keeping up with his friends instead of attending to his own needs and appetite for risk. If Personal Benchmark’s Safety bucket is for providing comfort today, then the Accumulation bucket is a vehicle for rich conversations about the dreams of tomorrow. As clients simultaneously manage their short-term fears and identify their long-term goals, they are able to experience the best of a goals-based solution.

Personal Benchmark was created in a time of comfort and even complacency on the part of some investors, but was done so with a perfect knowledge that there would be days like this. At Brinker Capital we believe that an advisor’s greatest value is providing “behavioral alpha”, increasing returns and mitigating risk through the provision of sound counsel. Our goal is to be your partner in that sometimes-difficult journey and Personal Benchmark is evidence of that commitment.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Do it in 30: Why Shorter Elevator Pitches Have Staying Power

Sue BerginSue Bergin

How long is your elevator pitch?  If you don’t have it down to 30 seconds, you may want to shut your door, turn off your phone, and whittle away until you can get there.

The elevator pitch is a high-level summary of your services, differentiators and value proposition.  It got its name because it should be delivered in the time it takes to ride an elevator, 30 seconds to two minutes.

shutterstock_54057646Recent studies of the brain suggest that you should think of it as an elevator ride to the fourth floor with no stops.  30 seconds tops.

We learn from Andrew Newberg, M.D. and Mark Robert Waldman, authors of Words Can Change Your Brain: 12 Conversation Strategies to Build Trust, Resolve Conflicts, and Increase Intimacy, that the brain can only hang on to about four to six chunks of information in a 20-30 second period.

Even if you make fantastic points throughout an engaging five-minute conversation, the prospect will only retain 30 seconds of information.  The brain processes every word as chunk of information.  Waldman uses a very simple statement to illustrate this point:

If I simply say, “I love this apple pie that you made,” we can hang onto that. There is “I” as one chunk, “love,” “apple” and “pie.” Each one of these forms a little picture in your mind, identifies the person, and when you’re saying “you made,” we already have 7 chunks of information.  That’s almost more than that person can grapple with. They have to think about the fact that you love the thing they made, what do you mean by love, your mind might be comparing apple pie to chocolate cake.[1]

When reviewing your elevator pitch, think not only about what you are saying, but how the prospect instinctively processes the information.  Brevity and simplicity help retention.

As a mentor once told me, “Be Brief.  Be Smart.  Be Gone.”

Make sure every word conveys something about you and the benefits enjoyed when working with you.


[1] Click here to read more of Waldman’s interview.