There is a new and growing movement in our industry toward so-called
evidence-based investing, which has much
in common with evidence-based
medicine. Given that it’s a relatively
new concept — even though the best
advisors have always practiced it — it
might be helpful to look carefully at
some possible alternatives to being
an evidence-based advisor.
Here is a baker’s dozen worth
of options for your thoughtful consideration. Many were adapted liberally from
a piece on evidence-based medicine written by Dr. David Isaacs and Dr. Dominic
Fitzgerald for the “British Medical Journal” in 1999. If I’ve missed any category,
please let me know.
The eminence-based advisor
This (usually older) advisor wants you to
believe that the more senior the practitioner, the less importance needs to be placed
on anything so trivial as mere evidence.
Apparent experience, it seems, is worth
more than any amount of evidence.
These advisors have a touching faith
in personal experience, which can be
defined as “making the same mistakes
with increasing confidence over an im-
pressive number of years.” Such an ad-
visor’s white hair and balding pate are
often called the “halo” effect and act to
trump substantive knowledge.
His (rarely her) well-appointed suite
of offices featuring fine views and paneled wood are usually seen as the best
available evidence of quality.
The fear-based advisor
This sort of advisor keeps on shouting
from the rooftops that “the end is nigh,”
over and over and over again, no matter
what actually happens, in order
to get you to respond. The idea is
that if clients and prospects are
sufficiently scared, they will run
to the fear-monger for refuge. In
other words, quite simply, fear sells.
The crooked advisor
This category of advisor is both
self-explanatory and far bigger
than generally assumed. For these
advisors, prospects and clients are
merely opportunities to be exploited by
the best available means. They actually do
care about evidence, but it’s a very different sort of monetary evidence (cha-ching).
The vehemence-based advisor
This sort of advisor sets out to substitute
volume and passion of transmission for
actual evidence so as to pummel, cajole
and harass prospects, clients and adversaries into believing that he (rarely she)
is really good.
The eloquence-based advisor
Proponents of this approach are always
smoooooth. They feature year-round tans
I Hope This Doesn’t
Too many advisors fail to practice evidence-based investing and advice
ABOVE THE MARKET
By BOB SEAWRIGHT