Terry Dennis, is President of Dennis Financial Group and was actually the first person to license our newly released “Professional RapidReview Tool℠ (“ProRRT℠”). 

He submitted an article to the International Association of Registered Financial Consultants (IARFC®), of which he’s a member at their request. Read the article here.

The ProRRT was specifically designed to recruit clients away from competitors . . . i.e., to uniquely increase the number of clients, AUM, gross revenue, and firm value of those investment advisors using it.

You’ll see “how” – discussed on the ProRRT℠ site, here

Testing our description of how the ProRRT can be used to recruit new clients, Terry found it so effective that he made it “the centerpiece” of his client recruitment strategy for his new, online “RetirementCheck” platform.

He’s using this brief video (only 26 seconds) to encourage prospective clients to take “The RetirementCheck Challenge:” https://youtube.com/shorts/KnGIZnvlRoA, which he uses the ProRRT℠ to perform. Among other things worth reading in his account, he reports that:

“This technology brings prospective clients from a common, “why do I need you?” attitude to a whole new “why do I need THEM?” attitude – usually in just one visit! 

Once this ‘shift’ has taken place, they’ve realized that the opportunity to get into (and remain in) better performing funds (often much better) can create a very substantial difference in their managed funds performance and their financial security. (emphasis his)

With the help of this technology, we’ve been successfully onboarding clients during the latter part of this year.

How successful? 

Well, within one 30-day period, we successfully recruited $3.4 million in new AUM – one client with $1.8 million and another with $1.6 million. The ROI is tremendous, and we are capitalizing for 2024 to expand our reach to a much broader audience of prospective clients. “ 

The important point is simply this. He tried it and it worked

It should do so for you as well. All you need to do is simply try it in the way described.

You may well find yourself doing even better than Terry. What do you have to lose? Try it and see.

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

Twitter
LinkedIn

DTC’s Professional RapidReview Tool℠ “ProRRT℠” now makes online meetings with client a competitively advantaged and more profitable preferred choice.  

Such meetings require no travel time for the advisor or the client, and the advisor can effectively meet with clients in any part of the country, not just within the advisor’s local area.

The chance for more meetings, with more clients (over a much broader area), with less operational expense, can produce a broad range of beneficial effects, including greater client engagement and satisfaction, enhanced regulatory compliance, more advisory fee revenue, greater profit, and a potentially dramatic increase in firm valuation.

To understand just how beneficial this could be for you, your firm, and your clients, please read on.

The traditional in person approach to client meetings may soon become obsolete.

The Covid pandemic made the shift to virtual / online meetings broadly accepted and much easier to conduct. Sharing screens with clients can save considerable time in producing and delivering hard copies of quarterly reviews and recommendations, and the meetings themselves can even be recorded for the benefit of the client and the potential the protection of the advisor.

But is simply performing a pre-pandemic style, in-person meeting with a client online the optimal way forward?

Is there a better way – a way that can also help to replace the “chemistry” that is lost when in-person meetings are replaced by online ones?

The answer is now a compelling: “YES.”

The ProRRT℠ facilitates a uniquely different online meeting – one never before experienced by clients.

The ProRRT℠ enables advisors to review and comparatively evaluate the client’s mutual fund and ETF holdings online with the client not only watching it being done, in real time, but with the client also participating to the extent the client may wish to do so (especially in selecting and weighting the various performance metrics that best match the client’s needs, goals, and preferences.

Sharing a screen to go over a typical, “static” quarterly review simply cannot compare to the client seeing the ProRRT℠ used to comparatively evaluate the performance of the client’s holdings, not just against a benchmark index, but also against all other potential investment choices within each relevant asset class.

Here are some of the key advantages:

•    The client will get to witness the comparative analysis in real time – something the client will have never before seen and which was never before practically possible.

•    The client will have an opportunity for input regarding the performance factors selected and their respective weightings.

•    Mutual funds and ETF retention and replacement decisions can be made by a fully informed client, with the advisor’s assistance, from among all of the choices revealed in the scoring and ranking process.

•    The client is directly involved in the process, with full transparency, minimizing the possibility of claims against the advisor / RIA for “unsuitable” recommendations or other potential violations of fiduciary duty arising from (for example) undisclosed conflicts of interest. Importantly, use of the ProRRT℠ effectively filters out all conflicts of interest, both known and unknowable.

•    Because of this, compliance with even the most stringent of the evolving federal and state regulations aimed at ensuring that what is recommended and sold is in the clients’ “best interests” can be provably demonstrated.

•    The client no longer has to rely solely on recommendations, regarding which the client has no meaningful way to “vet” or understand how that recommendation compares with all of the other choices that could have been recommended.

•    Moreover, the investment advisor would no longer feel the need to “defend” poorly performing choices that had been previously selected. They can simply be replaced by better performing choices selected by the client.

•    Importantly, as previously chosen mutual funds and ETFs begin to decline in performance and relative rank, both the advisor and the client will get to see something that neither has ever been able to see before. They’ll get to see which ones are moving up in rank – in the same asset class, in the same market conditions, with the same investment goals, and evaluated with the same blend of weighted performance factors.

•    This is vitally important and effectively helps to remedy one of the key causes of chronic underperformance – holding poor performing choices for far too long. The chief reason why poor performing choices are held far too long is that investors are very often unsure of which ones to select to replace the poor performers. They fear getting out of a bad one and into one that may prove to be worse.  So, figuring “better the devil we know . . . ,” they’ll very often stay in the poor performer until the cumulative poor performance becomes so bad that “anything would be better than this.”  But, by then, they have typically lost a great deal more money.  Periodic review, using the ProRRT℠, changes this and gives the client the confidence that he or she is moving to a solid choice, one moving up and/or holding high position in the relative rankings.  And they’ll do so sooner.

•    Necessary qualitative due diligence will be highly focused on only the top scoring / ranking replacement options, saving potentially significant amounts of advisor time and resources.

Here’s an example of how such an advisor-client quarterly interaction might look:

•    The advisor, already in possession of a copy of the client’s end-of-quarter brokerage statement, calls the client to arrange for an online Zoom, WebEx, Teams, or other meeting.

•    When the meeting takes place, the advisor opens the ProRRT℠ and shares the screen with the client.

•    They then proceed to score and rank the client’s mutual fund and ETF holdings (which the advisor can have performed in advance, to direct attention to those that truly need attention).

•    If the client’s choices are holding good positions / ranks, there is no need for further action and they go to the next ones.

•    If, however, they find that one or more of the choices have dropped in relative rank over a sufficient number of quarters to cause concern (for instance possibly dropping out of the top 10%, as scored and ranked using the client’s weighted performance parameters), the advisor and client can look at the top scoring choices and tentatively pick one or more for a qualitative due diligence review by the advisor.

•    Notes and screenshots can be taken during the meeting and, at the end, the advisor can inform the client that he or she will perform a quick due diligence review regarding the replacement choices tentatively selected and report back to the client the findings.

•    When that due diligence review is completed and reported to the client, a final decision can be made regarding retention or replacement of the choices and any trades necessary can be made.

This new model is the epitome of transparency and disclosure. It’s free of conflicts of interest and engenders and enhances client trust.

From our decade plus experience in developing and refining the technology and its application, we know that the overwhelming majority of clients who get to see and experience this for themselves never want to go back to relying on the naked recommendations of an investment advisor. As some have described it, “it would be like becoming deaf, dumb, and blind.” in this important area.
Importantly, in a very important way, investment advisors making use of this new methodology are also effectively “inoculating” their clients against losing them to competitors.

What could a competitor show them that is better than what they are seeing and selecting with the help of their ProRRT℠-equipped advisor?

With no non-productive travel time for the advisor or the client involved, more time can be spent on meeting with more clients and those clients can now be located in any part of the country, not just near the advisor’s physical location.  
The chance for more meetings, with more clients (over a much broader area), with less operational expense, can produce happier clients (with potentially much better investment results), a significant competitive edge, more advisory fee revenue, greater profit, and a potentially dramatic increase in firm valuation.

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

Twitter
LinkedIn

Start now with a powerful new way to recruit investment clients from your tax client base.

Recruiting investment advisory clients from among your own tax return clients can be explosively supercharged with the ProRRT℠.

 

Here’s how.​

If you are a CPA, accountant, or are otherwise engaged in preparing tax returns, you are now beginning to meet with your tax prep. clients to do their returns.

If you are also an investment advisor, it’s likely that only a small minority of your tax return prep clients are also investment advisory clients.

Here’s why this is a critically important time for new investment client recruitment.

Tax return preparation will give you access to your clients’ brokerage account statements, and you can use that information to score and rank their mutual funds and ETFs against all other available ones in each asset class, while they watch and even participate.

Involving them in the process is very important, since they will have never experienced anything like this. Want a way to distinguish yourself from other advisors? This is it!

In most instances, the top ranked choices will have produced substantially higher average annual returns with often less volatility than theirs. In other words, they’ll often see significant return premiums with no equivalent risk premiums, and those return premiums can often be quite large.

After performing this analysis for several of their holdings, you can say this: “I can do this for all of your investment choices, and we’ll likely get similar results.

But, at this point, one thing is looking pretty clear . . . it looks like ‘you’re leaving a lot of money on the table.’ 

Do you want to stay with your current advisor or would you like to come over to us, where we’ll use this new technology to help keep your investment choices optimized and help you make more money?”     

We know from experience that this will get you new clients,

As good as our new client recruitment strategy is for those with whom you have had no prior relationship (it certainly works), recruiting from among your existing tax clients (with whom you already has a relationship and who trust you) is obviously even better and more powerful.

And you don’t need the purchase the full ProRRT to do this. You can use the free “Checkup” version (which doesn’t show the names of the funds) to do it.

The client doesn’t need to see the names of the fund choices to see that there are much better choices possible.

Try it and see the value for yourself.

Of course, if the client switches to you because of what you’ve showed them, you’ll need the full ProRRT℠ to be able to provide the service you’ve promised them.

As tax season is ramping up, the timing for equipping yourself to do this is very important . . . it’s NOW. 

We thought it important for you to see and benefit from this, or at least pass this along to any friends who are CPAs and/or tax preparers who might also be investment advisors. 

Don’t miss this unique opportunity . . . time passes quickly, so do yourself and your clients a favor and act now. And, if you have any questions or need any help, please contact eric@decisionengines.tech or jack@decisionengines.tech.

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

Twitter
LinkedIn

Having too many choices and too much information about them can make deciding which to choose paralyzingly difficult, if not practically impossible.

On January 10th, we were surprised to see this brief article on Analysis-Paralysis, stating that: “By 2031, there could be one million managed investment products.” The article also points out that: “As of June 30, 2023, there were more than 742,000 products available.”

Wow! That’s dramatically more that we had estimated.

In many of our earlier posts, you’ll see us point out there are estimated to be well over 20,000 mutual fund and ETF choices. We believed 20,000+ to be a conservative under-estimate.

What we didn’t expect was finding out that we might have been under-estimating by a factor of 10X or more!

The article points out the largest single group of these investment choices is mutual funds and that the number of ETFs is also very large and rapidly growing.

However, whether it’s a total of 20,000 or 200,000+ mutual funds and ETFs, there are so many choices and so much information about each as to make trying to evaluate which ones are best for your clients, especially individually customized recommendations, virtually impossible.

What’s needed is a way to effectively use and benefit from such an overwhelming and growing number of choices and volume of information.

Fortunately, there has been a significant advance in information technology – the ProRRT – that now enables investment advisors and brokers to objectively score and rank any number of mutual funds and ETFs, within any asset class, in mere moments.

Importantly, for Reg. BI compliance, it also effectively filters out all conflicts of interest, both known and unknowable. It gives you the ability to provably demonstrate to regulators that what you are recommending to clients are in your clients’ best interests.

The ProRRT utilizes Decision Technologies Corporation’s patented decision-assistance technology that enables you to select any blend any of 48 different performance parameters and individually weight them to match their degree of importance to your clients and you.

Using this blend of weighted performance factors, the ProRRT will enable you to score and rank all of the funds within any asset class. It will show you (and enable you to show your clients) just how theirs (those you’ve recommended) did compared to all of the other choices you could have recommended and not just to a benchmark index.

It is also important to understand that a simplified version of the ProRRT is now available to individual investors (your clients). It’s called the Retail Investment Tracking Application (aka “Rita”).

Why is that important?

Well, with Rita (and the 24 performance factors it provides), individual investors will now be able to score and rank, for themselves, the mutual fund and ETF recommendations you’ve been giving them.

If they see that one you’ve recommended ranks 176 or 227 out of 677 choices within the asset class, with average annual returns (of perhaps 5%, 6%, or more) less than the top ranked funds and with higher average annual volatility over the last 5 years, then what?

Would you be at risk of losing that client?

Would you be vulnerable to another advisor (using the ProRRT to show your client that performance difference) recruiting your client away from you?

It’s important to understand thatThe Rita Effect” is real and, from experience, we believe its core lesson is simply this: Advisors cannot afford to have their clients know more about the relative performance of what the advisor has recommended than the advisor does.  

We also believe that as investor awareness and use of Rita grows, so will the benefits of the ProRRT to advisors using it, as will the risks to advisors who do not.

Regardless of the possible effects of Rita, in this world of too many choices and too much information about them, the ProRRT was specifically designed to help advisors answer this key question:

“Of all the available choices, which ones are best for my clients?”

It was also specifically designed to help you recruit clients away from your competition.

Take the no cost and no risk opportunity (using the free “Checkup” version of the ProRRT) to see just how good the mutual funds and ETFs you’re recommending REALLY are in comparison to others in which you could have recommended.

Try it and see for yourself how much money you and your clients may have been, and perhaps still are, “leaving on the table” by being in poor performing choices – choices that you (and they) have had no meaningful way, until now, to comparatively evaluate.

In a world in which everyone appears to be doing the same things in largely the same ways, it’s time for a meaningful change.

It’s time for you to be able to clearly differentiate yourself from your competition and to benefit from the unique competitive advantage, better investment results, and greater client satisfaction that the ProRRT can uniquely provide.

And, for any special help you may need with your firm’s compliance approval process, please contact us. We’ll be happy to carry the weight of that for you.

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

Twitter
LinkedIn

That’s “good news” for investment advisors using the ProRRT℠ – Rita℠ could prove to be a source of new clients.

Early in our development of our Professional RapidReview Tool, one of the people assisting us in new business development (let’s call him “Albert”) called to ask if I would be willing to meet online with his “significant other” (let’s call her “Rita”) to use the ProRRT to score and rank some of her mutual fund investments in advance of a meeting with her investment advisor.

I happily agreed since Albert had been of great help in making introductions.

When I met online with Rita, she had her brokerage statement handy. So, I opened the ProRRT and began to use it to score and rank her mutual fund investments, with her not only watching but also participating in the selection and weighting of performance factors important to her.

We started with the mutual funds in which she had the largest balances. Altogether, in about 45 minutes, we scored, ranked, and discussed her four largest holdings.

One scored well and was relatively highly ranked. So, there was no compelling reason to recommend a change.  The other three, however, ranked way down in their asset classes and it appeared clear that there were choices that had performed much better and better matched her needs, goals, and preferences within their asset classes.

It’s important to understand that Rita, while a very sophisticated and highly educated lady, has been a largely passive investor and was not knowledgeable regarding the comparative analysis of mutual funds and ETFs.

However, she clearly understood what she was seeing.

She stated that she had not seen anything like this . . . nothing that provided her with a way to see for herself the full range of choices and how they compared to her own holdings. 

She pointed out that she had been relying on the recommendations of her investment advisor, with no meaningful way to determine if those recommendations were good, much less the “best,” for her.

At the end of our meeting, she surprised me by asking: “Should I just go ahead and fire him?”

I suggested that she not do so, but to see if he would get her what she wanted. I pointed out that, because her account wasn’t large, if she proved to be too much trouble, he might actually fire her. With that bit of advice, Rita thanked me, we ended the meeting, and I thought no more about it.

Several days later, I was talking with Albert, and, toward the end of our conversation, he asked: “Would you like to know what happened with Rita?” I said: “Sure, I’d love to know.”

He then told me that Rita had fired her advisor. “Really?” was my surprised response. “Yes,” he continued, “she came back and told me that she would be willing to go to a different advisor (one with which Albert was working) but only on the condition that he license and use the ProRRT℠ technology.”

This unexpected result proved to be very instructive. It revealed an additional compelling rationale for investment advisors to obtain a license to use this new technology.

That important “lesson” is this. There is no way an investment adviser can afford to have a client know more about the relative performance and position of his or her mutual fund and ETF investments than the advisor who recommended them.  

A “retail version” of this technology, for individual investors (like Rita), has now been released – it’s our Retail Investment Tracking Application, akaRita.” Yes, we named it after the person who I had helped.

With that release, individual investors are now able to score and rank their mutual funds and ETFs for themselves, in virtually the same way I did for Rita. What will they discover when they do?  How will the ones you have recommended stack up?  

Here’s the takeaway: Rita is now here.

Are you prepared for “The Rita Effect”?  

Can you afford not to be?  If Rita, in the story above, reacted in this way, how will your clients react?  And that highlights a second, less obvious but equally important, lesson.

Rita did not want to do the scoring and ranking herself. She wanted an advisor to do it for her . . . one that has licensed and is using the ProRRT

That’s “good news” for investment advisors using the ProRRTRita could prove to be a source of new clients.

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

Twitter
LinkedIn

One of the key uses of the free ProRRT℠ Checkup Tool is to enable investment advisors to check how well the mutual funds and ETF's they are recommending compare to others they could be recommending.

If you are an investment advisor, using the Checkup Tool in this way will help you determine how much room for improvement there is in your investment recommendations.

It will also let you know how vulnerable you may be to losing clients to competing advisors with better recommendations.

While that’s a purely defensive use of the free Checkup Tool, it can also be used “on offense” to recruit new clients, including the clients of your competitors.  In fact, that was one of our original goals in developing the ProRRT℠.

Here’s how it’s done:

  • Simply contact the prospective client and arrange to meet; anywhere will do – e.g., a coffee shop.
  • Ask him or her to bring their most recent brokerage statement or quarterly investment report with them, explaining that you have something important that you’d like to show them.
  • When you meet (and after buying them a cup of coffee, etc.), ask him or her to pull out their brokerage statement or investment report and tell you what their single biggest investment holdings are (you don’t need to see their report or how much money they’ve invested),
  • Then open your laptop or pull out your iPad and log onto the free ProRRT℠ Checkup Tool and explain to the prospect how the technology works as he or she watches you score and rank what they are holding against all other available choices within that asset class.
  • It is important to show them the factors that can be used, and to ask which ones are most important to them and how much weight should be placed on them.  Involving them in the process is very important, since they will have never experienced anything like this – the transparency, objectivity, and most importantly, the feeling of empowerment in now being included in the review and selection process.
  • When he or she is happy with the factors and weightings, compare the multi-period returns and multi-period volatility of theirs against the top scorers.

In most instances, the top ranked choices will have produced substantially higher average annual returns with often less volatility – in other words, they’ll often see significant return premiums with no equivalent risk premiums . . . and the return premiums can often be quite large.

After performing this same comparative analysis for a few more of their holdings, say this:

“I can do this for all of your investment choices and we’ll likely get similar results. But, at this point, one thing is looking pretty clear . . . it looks like ‘you’re leaving a lot of money on the table.’  Do you want to stay where you are (with your current advisor) or would you like to come over to us, where we’ll use this new technology to help keep your investment choices optimized and help you make more money?”     

We know from experience that this will get you new clients.

You don’t need the full ProRRT℠ to do this, and the prospective client doesn’t need to see the names of the fund choices to see that there are much better choices possible. Try it and see the value for yourself.

One advisor recently said this: “If you let me use the tool to make enough money to pay for it, then I’ll sign up.

Well, that’s exactly what the free “Checkup” version enables you to do. Use it to successfully recruit clients and, when they’ve committed to come to you, then get the paid version so you can deliver on your service promises.

If you recruit just one new client, with $500,000 of investment assets during the course of an entire year using this unique client recruitment strategy, at a 1% fee you will have more than paid for the full ProRRT℠ license.

But there is no reason you cannot recruit many more clients and AUM, generate much more revenue, and better protect your clients from being “poached” by competitors.

Try it and see.

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

Twitter
LinkedIn

Let the ProRRT℠ help improve your investment selection the way “MONEYBALL” forever changed baseball player selection.

What’s “MONEYBALL”?

It’s not just the name of a very popular movie which, if you haven’t yet seen, you should. It’s the name given to a whole new way of comparatively evaluating baseball players – using performance metrics rather than the subjective opinions of baseball “scouts.”

The movie tells the story of how this occurred, and the struggles involved in changing the traditional system of baseball player evaluation and selection. It’s definitely worth watching.

What’s the connection with DTC’s Professional RapidReview Tool (the ProRRT”)? In an almost identical way, we’re improving the way mutual funds are evaluated and selected.

The time-consuming, initial screening process for picking funds for further, qualitative due diligence, is no longer about the size and reputation of the fund companies, or the size of their advertising / marketing budgets, or their name recognition, or the opinion of external or internal experts . . . and it’s certainly not about incentives that fund companies may be offering to have their funds preferentially recommended. NO!

With the ProRRT, it’s now (just like in MONEYBALL) purely about performance!

Which of the mutual funds and ETFs, within any asset class, have proven best over time at producing the investment results you’re seeking for any one or more of your clients?

Reference to the movie provides clients with an easy-to-understand description of the process you are using . . . a unique process that clients can both actually watch you perform and in which they can participate.

But that’s only a part of why the ProRRT is better than the system described in the movie.

In the movie, the comparative evaluation had to be done by a hired “Quant”, who created algorithms with which the comparisons were performed. No one but him really understood how to use it and (at least initially) almost no one trusted him or the results and recommendations he was producing.

But, as the movie documents, that ultimately changed.

Why?

It was because of the results – better players, better performance, and lower overall costs.

The proof?

They were winning. They were beating the competition!

How is the ProRRT “better?”

What took who knows how much time for the team’s expert “Quant” to comparatively evaluate baseball players, can now be done for hundreds of mutual funds and ETFs in any asset class in mere moments.

And, most importantly, you don’t need to be a “Quant” to do it. You can easily and rapidly perform the scoring and ranking of the funds yourself.

Just as with the MONEYBALL process, the ProRRT℠ helps you identify and select mutual funds and ETFs that better match the composite investment performance (the desired combination of risk, return, and other factors) you’re seeking and often with lower overall costs.

The proof?

After more than a decade of testing, we saw that the mutual funds and ETFs picked with the aid of the ProRRT℠ were winning. We saw that they were beating the competition!

You can now see and, better yet, experience and prove this for yourself.

The MONEYBALL system has forever changed professional sports.

The Boston Red Sox now have as many as 35 people working on analyzing “sports metrics” for the evaluation and selection of players.

The ProRRT℠, in contrast, enables you alone to quickly and easily comparatively evaluate over 20,000 mutual funds and ETFs (many more choices than there are baseball players) for your clients’ investment “team” (the mutual funds and ETFs comprising their portfolios).

If your RIA or Bank has an internal group comparatively evaluating mutual funds and ETFs for its investment advisors to recommend, the ProRRT℠ will help make them much more time-efficient and much better at their jobs.

Our Goal is to similarly improve the way mutual funds and ETFs are evaluated and selected, by empowering you (and members of your investment advisor team) to do something even more extraordinary than what the movie describes – something never before available.

It’s the best of MONEYBALL and it’s now available to you and your RIA or Bank!

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

Twitter
LinkedIn

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 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

Twitter
LinkedIn

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 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

Twitter
LinkedIn

For Individual Investors, the experience could be virtually identical.

Executive Summary:  Will there be any meaningful difference for individual investors between using a human investment advisor or an AI investment advisory platform? Probably not. The investors’ experiences with each will likely be functionally identical.  Both lack transparency and in neither do investors have any real control. Both require investors to “trust” that what will be recommended will be “best” for them, with no way to “verify” that is it is or will be. This inability leaves individual investors vulnerable to defective processes, biases, conflicts of interest, and possible outright abuses, all of which can corrupt the advisory process and degrade investment results.  The newly introduced “Retail Investment Tracking Application℠” (“Rita℠”), for individual investors, was created to specifically remedy these two deficiencies. Using it, you have complete and fully transparent control over the comparative evaluation of the mutual funds and ETFs in each asset class and can independently identify and select the ones you feel are best for you. Importantly, Rita℠ can be used in both advisory scenarios.

Here’s more:

There’s a lot being written about the use of “AI” (Artificial Intelligence) platforms in picking investments.  One concern, within the financial services community, is that it might operate to displace investment advisors. After all, if AI is commonly believed to be “smarter” than human beings, wouldn’t getting investment advice from AI be inherently superior?  While the predictive power of AI, and the ability to produce superior investment results is currently unknown and untested, the interactive experience of individual investors with each may be virtually identical.

When an individual investor interacts with an investment advisor, he or she provides the advisor with information about their financial circumstances, their investment needs and goals, their risk tolerance, etc.  The advisor then “disappears behind a curtain,” does something, and later reappears to tell the investor client, “here’s what I recommend.”  The investor-client can ask the advisor, “how did you come up with that recommendation?” To which question, the advisor can respond by describing the most elaborate of processes, but the problem is that the client can’t independently verify anything the advisors says . Worse, the advisor knows that.

With that in mind, let’s consider what an individual investor’s interactions with an AI investment advisory platform will likely be (there are virtually none at this point, so this will be a “thought experiment”).  The individual investor will provide (enter) information about their financial circumstances, their investment needs and goals, their risk tolerance, etc.  The AI platform then internally (out of view of the investor) does something, and then provides a recommendation to the investor.  The investor may (or, more likely, may not) have the ability to ask the AI platform, “how did you come up with that recommendation?” To which question, the AI platform can respond by describing the most elaborate of processes, but the problem is that the client can’t independently verify any part of that explanation.  Similarly, the creators of the AI platform know that.

So, what exactly is the difference?  In practical effect, there is none. The experiences will be virtually identical.

Am I asserting that there will be no advantage in following the advice of an AI investment selection platform over the investment recommendations of human investment advisors?  Not exactly.  AI investment selection recommendations may better filter out the influence human emotions (the emotions of human advisors), but perhaps not the “biases.”  Human advisors are taught to believe certain things and proceed in certain ways. It’s a part of their training and is required for their licensing.  AI systems are also programed and trained and, recently, the “answers” they provide have been shown to reflect “biases” inherent in their programing.  Again, is there any meaningful difference?  It’s hard to see one.

Here are the key problems / what’s missing with both. Neither is “transparent” and in neither does the individual investor have any control.  Each requires that the investor “trust” that what will be recommended will be “best” for them, with no way to “verify” that is it is or will be.  And, because the individual investor possesses no real power, too often, it’s not.

This has been the key problem with the financial services marketplace all along.  The financial services industry has been vendor-dominated since inception. The last thing that a vendor of a financial product (including mutual funds and ETFs) would want is for individual investors to have the power to comparatively evaluate their products against all other similar products. It would be naïve to believe that the financial services marketplace would develop and distribute a tool that will enable individual investors to perform such comparisons and find investment choices (other than theirs) that might better for them.  If it would benefit the financial services industry for such a tool to be available to individual investors, they would have created it and made it available long before now.  They haven’t and for that very reason.

What is needed is a Tool that directly deals with these problems and provides individual investors with bothtransparencyand morecontrol.”

Such a Tool has been recently (and quietly) introduced.  It’s Decision Technologies Corporation’s “Retail Investment Tracking Application℠” (“Rita℠”).  It enables individual investors to score and rank all available mutual funds and ETFs within any covered asset class (and most are covered), in mere moments, and in a way that effectively filters out all conflicts of interest.  Seeing all available choices and the factors used in comparatively evaluating them. That’s transparency.  Being able to select and weight the factors in ways that match your unique needs, goals, and preferences, so you can identify those that have proven best over time at producing the investment effects you are ideally seeking. That’s control.

The Rita website – https://sayrita.com – contains a growing body of educational and “how to” information, as well as news and commentary (like this), that individual investors will likely have never before seen . . . information often available only to investment advisors and brokers. It also provides actional information that will help you to improve your investment results (perhaps dramatically). Rita℠ can be tried, free of cost or obligation by going here.

Using it, you can quickly see how good the mutual funds and ETFs you are holding are in comparison to all of the others in which you could be investing.  And, if you have an investment advisor, you can quickly see just how good their investment choice recommendations (and/or the investment choices available in your own 401(k) plan) actually are and have been. You should try it and see for yourself just how much money you may have been, and perhaps still are, “leaving on the table” by being in sub-optimal investment choices that you’ve had no meaningful way, until now, to comparatively evaluate.

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

Twitter
LinkedIn

SAVE 20%

Schedule a demonstration and receive a 20% discount off your 3 month or 12 month subscription to the ProRapidReview