The mental and emotional tension of knowing what you should do and yet not doing it is a simple explanation of Cognitive Dissonance.

If we look, we can find its negative effects in many areas of our lives. If you are an investment advisor looking to grow your business and better serve your clients, it can be particularly harmful . . . even more so if you are unaware of its existence and its negative effects. Of all of the many things that you ideally should be doing, in this post we’ll focus on just one.

If you are reading this, you are likely aware of the ProRRT , the Professional RapidReview Tool℠.

Are you using it to recruit clients away from your competition?

That’s what it was specifically designed to help you do.

Are you using it to improve your investment recommendations and the investment results and satisfaction of your clients?

It was specifically designed to do that as well. Would you really not wish to have a compelling competitive advantage in new client recruitment and would you also not wish to improve your investment recommendations to, and investment performance of, your clients?

Yet even though this newly available tool was designed to directly assist in doing both, very few investment advisors have made any effort to try it.

Have you? If not, why not?

Your answer, or inability to logically answer, may reveal how and to what extent Cognitive Dissonance is negatively impacting your business development goals and the quality of the services you’re providing, perhaps dramatically.

Cognitive Dissonance is almost always objectively illogical and becoming aware of it is the first step in ending its negative effects.

But there is yet another aspect of Cognitive Dissonance that is more general, less visible, and industry specific that may be affecting you. And because it may similarly affect such large numbers of investment advisors (and industry leaders), the resulting illusion of a “strength in numbers” validation can make it difficult to recognize and even more difficult to remedy.

The Encyclopedia Britannica, describes it in this way:

“Cognitive dissonance, the mental conflict that occurs when beliefs or assumptions are contradicted by new information. The unease or tension that the conflict arouses in people is relieved by one of several defensive maneuvers: they reject, explain away, or avoid the new information; persuade themselves that no conflict really exists; reconcile the differences; or resort to any other defensive means of preserving stability or order in their conceptions of the world and of themselves.”

What beliefs or assumptions could be at stake here, in the financial services marketplace? How about starting with these:

  • There’s nothing truly new within the financial services world,
  • There’s no way to determine which mutual funds or ETFs may be best for any client (there are just too many and too much information about them),
  • The process I’m using to select mutual funds and ETFs to recommend to my clients is as good as anyone’s, and
  • My clients like and trust me, I downplay and don’t focus on returns, and I have no real fear of competitors.

Is there any new information that could contradict these beliefs or assumptions?

The answer is YES, absolutely.

The introduction of the ProRRT℠ and knowledge of its capabilities is the new information that contradicts every one of these, including the last one listed. If you’re not fearful of those using the ProRRT℠, you should be. Advisors using the ProRRT℠ will be recruiting clients away from investment advisors who are not using it.

But what’s coming is more of a threat than most investment advisor might imagine. The recent release of a simplified, individual investor version of the ProRRT℠, the Retail Investment Tracking Application℠ (aka “Rita”) will soon provide individual investors with more knowledge about the relative performance of their mutual funds and ETFs than the advisors who (without the benefit of the ProRRT℠) recommended them. The Rita Effect℠ is something virtually no one yet sees coming and for which advisors (other than those using the ProRRT℠) will be woefully unprepared.

The defensive maneuvers that the Encyclopedia Britannica then describes as being employed for the purpose of “preserving stability or order in their conceptions of the world and of themselves,” include: “they reject, explain away, or avoid the new information; persuade themselves that no conflict really exists; reconcile the differences; or resort to any other defensive means . . . .”

If you recognize any of these in your behavior, it’s a safe bet that Cognitive Dissonance is negatively affecting you and your future.

How much of this is intentionally being done, or is simply an uncritical, “go with the flow” acceptance of the status quo, is largely irrelevant. The negative effect is still the same.

So what’s the remedy?

Well, the first step in remedying any problem is to be aware that the problem exists. We hope that the discussion above has helped you to recognize the signs of Cognitive Dissonance and how they may be manifesting in your conscious and subconscious behaviors.

Having that awareness, the next step is NOT to indulge it but to directly act against it. In the present context, that action would be to simply try the ProRRT – to put it and its claims (the truth of the “new information”) to the test.

Cognitive Dissonance and its negative effects fade in those who are willing to do so and are prepared to accept and act on the results that they experience for themselves.

So, what do you want to do?

Do you want to stay trapped in Cognitive Dissonance, where nothing new is possible . . . where you continue to do the same things, in largely the same ways, as everyone else?

Or do you want to try something new and open yourself to the opportunity of better results for yourself and your clients and, in doing so, also help to beneficially change the financial services world?

The choice is yours. We hope you make it a good one. We’ll be happy to help.

eric_smith

Eric S. Smith, J.D.

Eric S. Smith, J.D. is CEO of Decision Technologies Corporation, and President and Investment Advisor Representative of Trustee Empowerment & Protection, Inc., a Registered Investment Advisor

Ben’s letter back to Priestley described his decision method, and it is widely accepted as the first written account of a “decision-assistance” technique. You can enjoy reading it below.

When you do, you’ll see him describe some challenges with which we are all familiar, today – challenges that the decision-assistance technology that powers the ProRRT℠ was designed  to help solve. One of the most important of these, as Ben points out, is that “there is often too much information to consider . . . and that makes decisions difficult.” Without the benefit of modern technology, Ben classified “factors” and “weighted” them, and then comparatively evaluated them to help in making his decision. Sound familiar? 

However, Ben mentions that his decision-making process involves three to four days while, with the ProRRT℠ the process  can take you mere moments . . . a key benefit of our patented decision-assistance technology.

So, did Ben Franklin anticipate the ProRRT℠?  In a way, we believe he did. He certainly recognized the problem of having too much information, applied logic to find a way to productively use the information, and articulated a benefit of the use his process (a benefit shared by ProRRT℠ users) – that by doing so one is “less likely to take a rash step.”

Unfortunately for Ben, he was way ahead of his time and didn’t the benefit of ProRRT℠ technology. You do or, at least, you can. We wonder what he would have thought to see the speed and effectiveness of scoring and ranking hundreds of mutual funds and ETFs (and doing multiple “what if” tests, by adjusting factors and weightings) in mere moments. Perhaps he would have been an “early adopter” and might have been able to write a shorter letter.

THE BEN FRANKLIN LETTER

The letter below is a response from Ben Franklin to Joseph Priestley’s letter requesting assistance on making a difficult decision. Ben’s letter back to Priestley described his decision method, and it is widely accepted as the first written account of a “decision-assistance” technique. Although, the technology and techniques have advanced in the last 250+ years, the rationales behind using a decision-assistance process still remain.

Letter To Joseph Priestley London, September 19, 1772

Dear Sir,

In the Affair of so much Importance to you, wherein you ask my Advice, I cannot for want of sufficient Premises, advise you what to determine, but if you please I will tell you how.

When these difficult Cases occur, they are difficult chiefly because while we have them under Consideration all the Reasons pro and con are not present to the Mind at the same time; but sometimes one Set present themselves, and at other times another, the first being out of Sight. Hence the various Purposes or Inclinations that alternately prevail, and the Uncertainty that perplexes us.

The point is made that there is often too much information to consider at a single point time and that makes decisions difficult. Consider, in comparison, the much greater amount of information available today, in this “Information Age.”

To get over this, my Way is, to divide half a Sheet of Paper by a Line into two Columns, writing over the one Pro, and over the other Con. Then during three or four Days Consideration I put down under the different Heads short Hints of the different Motives that at different Times occur to me for or against the Measure.


Ben is collecting all the factors he needs to consider within his decision process, and he is classifying his factors into Pros & Cons. The method he employs aligns closely with what we do today with our division of mutual fund and ETF performance factors between “Return” maximization-related and “Risk” minimization-related factors.


When I have thus got them all together in one View, I endeavour to estimate their respective Weights; and where I find two, one on each side, that seem equal, I strike them both out: If I find a Reason pro equal to some two Reasons con, I strike out the three. If I judge some two Reasons con equal to some three Reasons pro, I strike out the five; and thus proceeding I find at length where the Ballance lies; and if after a Day or two of farther Consideration nothing new that is of Importance occurs on either side, I come to a Determination accordingly. (emphasis added)


Once he has his factors classified, he weights them. He is not actually applying any math, but he’s using process of elimination to strike the factors from the decision, by identifying their relative weightings.


And tho’ the Weight of Reasons cannot be taken with the Precision of Algebraic Quantities, yet when each is thus considered separately and comparatively, and the whole lies before me, I think I can judge better, and am less likely to take a rash Step; and in fact I have found great Advantage from this kind of Equation, in what may be called Moral or Prudential Algebra. (emphasis added)


One final and most important point here is that he’s applying a process to remove ‘rash’ emotions from his decision.


Wishing sincerely that you may determine for the best, I am ever, my dear Friend,

Yours most affectionately,

B. Franklin


Ben didn’t have the benefit of our patented, decision-assistance technology – YOU DO!


Source: Mr. Franklin: A Selection from His Personal Letters. Contributors: Whitfield J. Bell Jr., editor, Franklin, author, Leonard W. Labaree, editor. Publisher: Yale University Press: New Haven, CT 1956.

eric_smith

Eric S. Smith, J.D.

Eric S. Smith, J.D. is CEO of Decision Technologies Corporation, and President and Investment Advisor Representative of Trustee Empowerment & Protection, Inc., a Registered Investment Advisor

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