As a parent it’s hard to know if your kids are listening to the lessons you teach them. “Hey, put on sunscreen or you’ll burn” I said to my 14 year old son. One day later he had a sunburn.
Was I not forceful enough with my advice? Did he just not pay attention to me? Am I teaching the wrong way? Educating a loved one is a never ending task but the better you do it, the higher the odds of success.
Educating people on markets and investing is a million times harder. Each individual comes to the table with a different set of life experiences and thoughts about money. Getting them to use sunscreen would be trivial, giving them the right financial education requires creativity and perseverance.
I ran a poll on Twitter last week and asked the following question:
Ill admit that I didn’t get a massive sample size but, to be honest, I was not shocked by the results. I have this pet theory that, in general, when Wall St tries to educate clients on the stock market and investing it’s often done in a way that’s too complicated and lacking a personal touch. It’s why I have dedicated my career in Baird’s Wealth Management division to behavioral finance and writing in a way that people can understand (and hopefully enjoy).
After seeing the results of this poll I asked 5 advisors inside of Baird to reach out to their clients and ask the following: “Give us 3 words that come to mind when you hear the phrase ‘stock market’ and ‘investing’”. I thought to myself “their answers might tell us whether our efforts to educate them on what really matters is working or not”. Let’s look at what they said.
Since this is a word cloud the larger the word, the more responses we got using that one specific word. The two standouts are “VOLATILE” and “RISKY”, which I think is perfect. On a day to day basis the market is a coin flip to be positive or negative, so it will always appear risky. Over the short run emotions dominate price action, so volatility is something we must all live with.
Notice what’s not in here? Words like “beatable” or “timing”. Things you might see in newsletters that only enrich the author and not the reader, the kind of thinking that might lead an investor astray. I’m super pleased with that.
The rest of the answers show insight into how the advisors are engaging with their clients. “Exciting”, “Unknown”, “Fascinating”, these are all real emotions that fill client’s heads when thinking about the stock market. The advisors likely let them know that it’s ok to be fascinated and excited about something that is ultimately unknowable, curiosity is what makes humans so great. “Growth” and “opportunity” are fantastic words to think about with respect to the stock market because they lead us nicely into the next section….Investing.
I have to tell you, I was super excited with the results of this word cloud. Look at the top 4 and tell me these Baird advisors aren’t doing an amazing job educating their clients.
Investing is about the “FUTURE”, it requires “PATIENCE”, it is super “IMPORTANT”, and it demands “STRATEGIC” thinking. Sprinkled in there is the fact that investing is “long term”, “rewarding”, “complex” and “ever changing”. Someone even used “planful,” which is a nice shoutout to our financial planning teams!
I really want to drill down into “PATIENCE” though because that will always be the key to reaching your goals. There are two things you need to hold in your mind to be successful at stock market investing: 1) the world breaks all the time, the market crashes often, but that 2) doesn’t preclude long term growth. The worst kind of investing mistakes happen when people forget this one word (or they abandon it during volatile moments like March 2020).
Guys, the world really does break all the time, there is never a steady state of complete peace and prosperity where investors have no concerns and just dance through tulips while reaping 20% returns.
Wars, recessions, pandemics, societal unrest, political uncertainty, these are all present throughout human history. You must accept that the World will unravel from time to time but that doesn’t preclude FUTURE long-term growth, the kind you can benefit from as an investor (Long term isn’t 1 year or 3 years, its 10+ years, don’t forget that).
I was so thrilled by the results of this little experiment that I felt compelled to share the answers publicly, and while it looks like I need to continue educating my son on the use of SPF50, I feel like our advisors are doing an awesome job with their clients.
To be clear, education is just one component of the relationship between a client and their advisor, but it can be useful in helping to cut through the overwhelming noise emanating from the market. Without it, investors can become easily distracted.
Every single day Baird advisors are out there helping real people reach their goals, educating them on what’s important, and guiding their plans through an uncertain future. If you feel like you aren’t getting the right kind of education with respect to your money and investing, give us a call.