From behavioural finance to self-improvement and ESG, these titles offer valuable nuggets for any professional advisor
It’s that time of year again, but with a 2020 twist: as coronavirus crisis continue to spread and families are encouraged to forgo their usual reunions, the traditional in-person holiday festivities have been replaced with Zoom parties and sombre reflections on the events of 2020.
As Canadians take stock, financial advisors will also be taking time to digest the lessons of the past 12 months. For executives and managers, succession planning and ensuring business continuity are sure to be high priorities. For advisors more broadly, it’s about getting back to basics – advancing their careers and providing the best advice possible – and here are five books that can help with that.
Thinking in Bets (2018)
Using poker as a jumping-off point, former professional poker player Annie Duke discusses the psychology of decision-making, dissects common pitfalls, and recommends strategies to make better choices. My personal favourite pro tip: the outcome of a decision is not a good indicator of decision quality. In the world of finance, this means a poor result in one's investment portfolio – for example, substantial losses during the February-March drawdown – doesn't necessarily mean their asset allocation was wrong. In a similar vein, getting outsized returns by holding leveraged exposure to the stock market doesn't mean people using leveraged index ETFs is wise.
The Psychology of Money (2020)
Another behaviour-focused book, this work by Morgan Housel is much more zeroed in on the financial aspect of decision-making. In 19 easy-to-digest chapters, he systematically explains why monetary success is in many ways more dependent on consistency and prudence than sheer number-crunching and spreadsheet analysis. The most important takeaway for me: "The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference."
Range (2019)
Though not written with the financial advisor in mind, the core message of Range is sure to resonate among those with a holistic-planning bent. In it, David Epstein masterfully makes the case that, in this wicked world, the ones who are able to hold hunches lightly and draw from a diversity of experiences are more likely to experience professional and personal success. My personal favourite chapter enjoins readers to "Drop Your Familiar Tools," which is a lesson any advisor trying to outrun disruptive change might want to consider.
Advice That Sticks: How to Give Financial Advice that People Will Follow (2018)
Some advice is bad, and some advice is badly given. That's the core insight motivating this homegrown tome written by financial psychologist and executive coach Dr. Moira Somers. It tackles the problem of clients’ non-compliance or, as she prefers to label it, "non-adherence" to advisors' recommendations. Published in 2018, the work is written with refreshingly simple language and entertaining anecdotes, with a simple framework of factors that contribute to the stickiness (or non-stickiness) of advisor recommendations. Whether you're struggling with emotional clients, the baggage of interfamily dynamics, or deeply ingrained "financial scripts," this how-to book for wealth professionals bursts with tools and tips to help make the sometimes-bitter pill of advice easier to take.
Reimagining Capitalism in a World on Fire (2020)
The title might sound more than a touch dramatic, but many ESG investors will agree that sounds about right. Written by Rebecca Henderson, one of the professors teaching the eponymous course at Harvard University, the book is hopeful without being naïve. It takes a sweeping look at the systemic issues that threaten our society – environmental destruction, wealth inequality, and unfair labour practices, to name a few – and surveys how governments, businesses, and financial institutions are, slowly but surely, working to make the world a better place. For anyone seeking a definitive reference on sustainable investing, this is definitely a contender.
