by Ken Haman, AllianceBernstein
You’re reading a blog from an asset-management company. What could be more provocative than a title that promises a commentary on what’s ahead for the new year? Unfortunately, you and I know that no one can predict the future and that everyone is facing the same limiting conditions of uncertainty, complexity and urgency as they try to make good decisions. Our investment professionals do a great job in navigating these three conditions on behalf of their clients, but no one has an actual crystal ball (I know, because I checked).
What we can do at the beginning of the year is reset our thinking, break past patterns and set out to be intentional about our choices. I can’t think of a better time to put the patterns and challenges of 2020 behind us and tackle the new year from a fresh perspective.
Not Another Set of New Year’s Resolutions
I’m not in the habit of making New Year’s resolutions because I know that I’m unlikely to keep them for more than a few days. There has been a ton of research in behavioral finance about why this is true for most people: the limitations of willpower to sustain positive change in human behavior. No one has summed up the value of New Year’s resolutions better than Dan Ariely in his wonderful book Irrationally Yours:
Dear Dan,
Do you believe in New Year’s resolutions?
—Janet
Dear Janet,
Yes. Very much. Every year for about a week: for about five days before the end of the year and for about two days after New Year’s Day.
—Dan
In his book Thinking, Fast and Slow, behavioral scientist Daniel Kahneman explains that resolutions are made in the conscious, rational part of the brain, which he calls System 2. This part of the brain contains thoughts that we have control over and that require a lot of energy to sustain over time. Kahneman also calls this system the “slow-thinking” part. He calls the less rational part of the brain System 1 or “fast-thinking.” System 1 controls habits and emotional motivation: this is the part that wakes you up and reminds you it’s time to do your five-mile workout (once you establish the habit). What System 1 does effortlessly, System 2 finds exhausting, which is why our brain has these two systems.
As Kahneman writes, “System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2 allocates attention to the effortful mental activities that demand it, including complex computations.” A few people are really good at moving thoughts from System 2 back to System 1 and creating new habits to change old behaviors. But most of us are not, so don’t feel bad if this isn’t a strength.
A Better Option for Starting the Year Intentionally
One of the interesting features of our “slow thinking” patterns is how much they’re based on language. Working through a problem deliberately and logically requires manipulating and organizing complex concepts to create order; in many ways, thinking is very much like talking. Most of us have talked a problem through with another person. Such conversations help crystalize important ideas and keep competing ideas organized and orderly.
In this way, thinking about the future is like having a healthy conversation with yourself, working through competing ideas and reaching a conclusion. So, instead of making idealistic resolutions that we already know we won’t keep, we can use our natural strength to do something different: we can ask ourselves a really important question and spend the next 12 months thinking about all the ways we can answer it.
What’s the Best Question an Advisor Can Ask in 2021?
There are hundreds of important, provocative questions that advisors can ask about themselves and their business that will yield good results: “How can I attract bigger clients?” “How can I get more productivity from my team?” “How can I understand my clients better?” “How can I expand revenue?” “How can I work smarter instead of harder?”
The interesting thing about these questions is that the brain must focus intensely on each question as it is asked in order to understand it. Then the brain automatically begins generating hundreds of ideas to find one that fulfills the framework of the question. This means that the bigger and better the question, the more great ideas the brain will generate while it’s reacting. The trick to changing your perspective on the coming year and intentionally conditioning your brain to shift your mind-set to greater creativity is to ask a great big question that you can think about all year long and come back to over and over. If you start by asking a big enough question, you will never exhaust the potential creative responses.
There are lots of such questions, and any will do. One that I have asked many financial advisors that has generated great results is this: “What do you want to be known and appreciated for by your clients?” This shifts the focus from “What do you want to get in the coming year?” to “Who do you want to be in the lives of the people who are most important to you?” The question points to the very heart of your business model: “What are my clients currently experiencing from me, and what do I want that experience to be in the future?” It shifts your focus from you and your activities to your clients and what they most need from you.
To help you refine your mental search, read the AllianceBernstein Advisor Institute’s white paper Inside the Mind of the Uniquely Successful Investor and explore the seven fundamental questions that all clients have of their advisor. With those in mind, your one big question will take on a whole different magnitude of power to transform your business.
To request the white paper call the AllianceBernstein Advisor Institute at (800) 227-4618, or visit http://alliancebernstein.com/go/abai for more Advisor Institute resources.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.
This post was first published at the official blog of AllianceBernstein..
