Hi Friend,
Investors can be broadly classified into 3 different categories.
1. Those who need the Ego Pampering:
- Though this category of clients say they need an advisor, what they really need is a marketing guy (a sales man) who is good at pampering their Ego.
- They expect a Sales man to second what they think is right. The Sales man who can do this 'the best' gets maximum business.
- Social proof (also known as informational social influence
, is a psychological phenomenon where people assume the actions of others in an attempt to reflect correct behavior for a given situation and is driven by the assumption that surrounding people possess more knowledge about the situation) is a common trait in this category.
- So, logic has little impact on this category of investors unless they see social proof for the same, which is unlikely in most cases.
- A genuine advisor, whose duty is to point out our 'thought flaws' and correct them with our help, is at a dis-advantage with this group.
- Unfortunately most prospective investors fall in this category (of course to different degrees).
- The 'agent culture or the Wall Street Culture' - of keeping an investor always in control, even when he/she is wrong, for the fear of losing business - is prevalent due to this group.
2. Truth Seekers - Those who accept the truth and change accordingly:
- Humility (the quality of having a modest or low view of one's importance) is a basic trait of this group.
- Because they know what they don't know or because they accept the possibility that they may not be good in a particular field, they look for an advisor who compensates for this.
- They appreciate hard work and honesty.
- This is the category a genuine advisor looks forward to working with as this is the best category to add value with minimal friction.
- Obviously, this category of clients is a minority.
- Given the limited supply of 'truth seekers', a genuine advisor hopes that some from the first category of clients can be turned in to this second category with patient effort, but the hope often proves futile.
3. Super-Egoists:
- No genuine advisor would likes to take 'Panga'(trouble) with this kind, but as you know accidents happen.
- If anybody ever says to a client of this category that 'he/she is wrong' or 'not so wise in his thinking', one can be sure that the days are counted in the relationship.
The most important traits of a Great investor:
Here is what Mr.Michael J. Mauboussin, Wall Street Investment Strategist, Author, Professor has to say (please note Emphasising and comments in braces are mine)
- Great investors don’t get sucked into the vortex of influence.
- This requires the trait of not caring what others think of you, which is not natural for humans (meaning we have to deliberately practice it).
- Indeed, many successful investors have a skill that is very valuable in investing but not so valuable in life: a blatant disregard for the views of others (which the first category of investors are not suitable for as they require 'social proof')
- Success entails considering various points of view (which makes sure that the third category- the super-egoists, isn't suitable at all to be great investors) but ultimately shaping a thesis that is thoughtful and away from the consensus.
- The crowd is often right, but when it is wrong you need the psychological fortitude to go against the grain. This is much easier said than done, especially if it entails career risk (which is often the case).
Please remember, when one doesn't feel any friction at all in a relationship with an advisor, he/she probably is a 'Sales Person' or one 'may be a first category of investor'.
It is almost impossible that a genuine advisor doesn't have friction with an investor at all, as his basic work (pointing out our thought flaws) hurts our Ego, more often than not.
Productive friction/Thought friction is an indicator that an advisor is doing his job.
Thank you.
Sources:
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