Owning Your Agenda

by Benjamin Beck, CFP® Benjamin Beck, CFP® | June 14, 2022

You may have noticed, many of my musings start with ownership of a major sports team. That’s because the world of competitive sports offers excellent examples of the common themes we encounter in our work.

Indulge me and imagine you're the owner of a major sports team, and picture that this asset, this team that you own, will ultimately provide for your livelihood as you get older. This organization generates your revenue stream for retirement. How this organization performs is a leading indicator of what your retirement will look like. 

One of the first things that you have to do as an owner, assuming you already have players, is to hire a solid coach.  As an owner, you would look at the track record of coaches, find out who they are, and get a sense of what they had accomplished in the past.  But more importantly, you’d want to know their philosophy, and understand their belief system.  As an owner, you need to be able to come to a conclusive answer to the question, "Do I trust this person to be able to execute on their stated philosophy (a way of thinking with which I agree), in order to provide the most desirable outcome for my retirement?"

Here you are, the owner, and you’re interviewing a coach in whom you believe 100% --

everything from who they are, their philosophy and how they do what they do. Then you look at this person’s career track record career and discover that it’s average at best. Call it somewhere around a 500 winning percentage. But you believe in this person so much, in terms of what you think they can do, how they can lead, their process, that you hire them anyway. 

In the first year, the team’s performance is not even average, in fact, it’s below average, only winning about 30% of the games. Call it “abysmal” in terms of win-loss record. What should you do you now? You believe in the process, you believe in the person, and you trust the person. How much should track record influence your decision-making? Well, in this case, if you stayed with the coach, and that coach went on to lead the Patriots to six Super Bowl wins and a total of nine AFC Championship wins over the next 15 or so years, I would say that was a pretty good outcome for the Kraft family. 

This got me thinking about track record and how irrelevant short-term performance and fees are – not just in sports, but in our business, too. How many prospecting meetings, call them initial interviews with clients, have we all been involved in where we get the question about track record? More than I can count. As I get increasingly experienced and older in this business, I have come to the conclusion that this conversation about performance and fees is vastly irrelevant. When it comes to the questions of “what’s your track record?” and “how do you justify your fees?” there are three things that stand out to me. 

First, when someone asks you about your track record, the assumption the prospective client is making is that the advisor’s primary function is portfolio management. But it’s not. The primary function of the advisor is planning. If you really think about it, what purpose does a portfolio serve if it isn’t tied to a plan, if there isn’t a detailed conversation, recorded and documented about the client’s long-term objectives? It’s a conversation about the client’s future, not the market’s future (or its past.) You tell me, what the hell does performance have to do within the context of this conversation? Absolutely nothing. 

The second thing is that most people assume that the primary determinant of your investment success is the performance of the portfolio. It took me some years to understand this is not the case. What determines investment success is not portfolio performance, but investor behavior. When you think about our role as advisors, look at it as guiding folks to avoid behavior that will sabotage their plan in the long term. Prospective clients need to be educated on this point.

The third thing is that advisors need to question the feeling of being judged on the basis of portfolio performance. If you are an advisor who is compelled and prepared to be judged on the basis of a performance number, you need to take a good look at your own behavior, your own fears, and your own insecurities. We should all be prepared to be assessed, to be held to a standard. But on the basis of what? I'm willing only to be judged on my trustworthiness, my devotion to my client's best interests, and my competence as someone who understands financial planning and can execute a plan. I am willing to be judged on my ethical standards. And last, but certainly not least, I am willing to be judged on my ability to coach a client during these once-every-five-or-six-year episodes, where they will be on the edge of a cliff emotionally.

Looking at it through this lens, these two questions: “What’s your track record? What are your fees?” are the least valuable questions a client could ask. The prospective clients ask these questions because don’t know any better, but that doesn’t mean that you need to be compelled to provide an answer that won’t help them in their discovery process. 

While these may be the worst questions you can be asked, worse still is our feeling that we must provide the answers on the spot. When you allow the tone of the relationship to be set by these two questions, you’re setting the agenda on terms that won’t serve anyone. They won’t serve the client, they won’t serve you, and they certainly won’t serve the long-term relationship. 

So what should the agenda be? In my opinion, the conversation should be entirely focused on what the process is that we as a firm can put in place for the client to help them execute their long-term objectives. A big part of that, of course, is managing their behavior when we go through tough times. It’s managing their behavior at all times, but in particular during the hard times, because that’s when they are most prone to reactivity.

What then is our value proposition? How do we help people get better every day? It's not through portfolio performance. It's not a number. It's not about our fee or lowering our fee. We are judged every day on how we set or regain control of the agenda, especially in the initial meeting that sets the tone for the entire advisor-client relationship. And by the way, this is not about objecting to the client’s questions or disagreeing with them. To me, it's all about having a dialogue, listening, repeating, truly engaging in the art of the conversation, and coaching them to ask better questions. The questions that will serve the long-term relationship.

In the discovery process, in that first meeting especially, it is of paramount importance to have a dialogue about what really helps folks reach their long-term goals. You can address it from a place of experience. We know for a fact that people who are willing to manage their impulses are the ones that succeed. The discovery meeting is a fantastic opportunity for you to determine whether or not this prospect is the type of person we are going to grant entrance into our world. You get to decide whether we are going to allow them to come aboard our ship. We tend to think that it’s the client who decides whether we will work together. No, in fact, we are the ones who determine whether or not they have the capacity to be helped. 

Being based in the Northeast, most of us know Bill Belichick and the Patriots' record over a long period of time. But their performance and track record (both the team and Belichick’s) are irrelevant. There were certainly times throughout those twenty or so years that Belichick coached, where if you were looking at things in a vacuum, you might say, "Geez, 709 record last year. Not exactly the coach I want the helm.” Not knowing anything else about him, you may have dumped him.  In hindsight, it would have been a bad move. 

We need to know as advisors where our value lies, and to never ever divert from that message. We can’t let anyone commandeer the agenda, because to do that would mean veering from the very path to serving our clients. Will we repel a large majority of the people with whom we come into contact? Sure. It’s fine, though, because our message will resonate with the people who will be great clients for decades upon decades. 

That is the value of owning your own agenda.

Ben Beck is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life.

Dancing with the Analysts

Additional Reading