Do more ‘rapporting’ and less reporting


For most people investing is an episodic concern triggered by a desire to understand a report or explain a (likely unexplainable) event. Most seek re-assurance, certainty (unrealistic levels thereof), confidence (unrealistic levels thereof), and comfort (unrealistic levels thereof) beyond the analytic and rational explanations we often provide. Their desires and interests parallel ours in medicine. Episodically we seek re-assurance, certainty (unrealistic levels thereof), confidence (unrealistic levels thereof), comfort (unrealistic levels thereof) and rational explanations from medical professionals, typically triggered by a report or by a (likely unexplainable) event. Few doctors are sufficiently sensitive to our anxiety and ignorance, for they too are trained to see their discipline as more scientific than it is and to pretend it’s more certain than it is. Few take the time and effort to explain the ‘whats’, ‘whys’, ‘hows’ and risks in honest, jargon-lite, non-patronising ways that connect to our minimal levels of understanding and our emotional configuration.

We professionals are selected and trained partly on our ability to reason quantitatively, analytically and rationally consistent with the paradigm that investing is broadly ‘scientific’. Like all experts we communicate to each other via jargon, based on presumed levels of understanding. That imposes a language barrier to communicating with outsiders. Even good advisers who overcome that challenge need to improve as is doing by explaining the “needlessly complex and arcane world of financial markets, demystifying it … by promoting a ‘plain English’ standard … and by deciph[ering] the highly specialised language of finance …” [Pet peeve: Anyone caught using ‘quantum’ instead of ‘size’ or ‘amount’ should be publicly horse-whipped.]

Communicating with different types of people

A more difficult communication challenge is reaching people whose patterns of thought differ from ours (think: social workers, designers, …), people who may be exceptionally intelligent yet struggle to comprehend analytic and especially quantitative concepts. Even insiders are not always convinced by rational reasoning. One world-renowned investor begins with supposedly obvious axioms and uses supposedly strict logic to draw supposedly ineluctable conclusions. I can fault neither his axioms nor his logic, yet I’m frequently left with a nagging scepticism about his conclusions’ veracity, with an intuitive sense that investment markets are too fuzzy and too uncertain to justify and sustain his rigour or his inferences. He fails to persuade me of his ‘whats’, ‘whys’ and ‘hows’. Even worse, as a client I am irritated by his disinterest in my being lost or remaining unconvinced, by him ignoring my different patterns of thought and lesser levels of understanding (especially when he thrusts into macroeconomics.) Pro forma he does ask for questions, but for the familiar troika of reasons I rarely volunteer.

First, at times my ignorance is so complete I can’t even formulate a question. Questions that appear to be non sequiturs may be but disguised cries for help, something he wouldn’t appreciate. Second, all too often I’m reticent to reveal (too much) ignorance in front of peers. Third, all too readily I meekly accept a ubiquitous power relativity: If A explains something to B and B doesn’t understand, the agreed if unspoken presumption is that it’s B’s fault. It’s B who has to “do the work” to understand. Confronted by A’s power (aka knowledge) B readily accepts his lower status. And B should do the work. But A too has a responsibility to do the work, to explain it better, to find other ways to effectively communicate with B. That re-orientation is surely a more appropriate allocation of responsibilities.

Communicating by conversing and connecting

Like this expert we spend excessive time reporting and not enough ‘rapporting.’ Medical imaging reveals how bloodflows to components of the brain responsible for understanding are greater when conversing than when reading. Conversing provides the base for rapport, for reading the subtle cognitive and emotive signals we use to communicate effectively. My early learning about investing was guided by a stereotypical actuary to whom understanding and hence communication was a coldly logical and rational process, so much so that he imposed an absurdly rigid rule: he would explain something once, twice, but never a third time. He was immune to my cries for help (especially when I was abandoned after two attempts), to the pain of learning, to my emotions, to my feelings of fear, distrust and inadequacy. Yet even investment managers and actuaries whose patterns of thought are deeply embedded in analytic and logical frameworks express themselves in affective and emotional language, as evident in the 2012 CFA report, Fund Management: An Emotional Finance Perspective.

Crucially, communicating effectively, in ways that connect with a client’s depth of understanding and emotional state builds trust, something profoundly lacking in our industry especially in light of the recent revelations from CBA and Macquarie. A recent survey across 30 countries asked people which of 15 industry sectors they trusted. Finance was ranked dead last; only 50% said they trusted it (ie, ‘us’). (The IT sector was top ranked with 77%.) At a conference of financial advisers and planners I asked the audience for a visceral reaction to “Can most people be trusted?” 63% said ‘yes’. To the question “Can most people in finance be trusted?” the ‘yes’ vote dropped to 56%. We don’t trust each-other. Yet trust is (almost) all we have. Not only are our investment theories weak and our empirical data limited but the deadly confluence of informational asymmetry and low signal/noise ratios mean that quality can never be tested.

Honest, jargon-lite, non-patronising, communication that connects with someone’s cognitive and emotive states requires an investment in thought, sensitivity and time. The best advisers do so invest and reap substantial payoffs from effective communication. We should learn from them.


Dr Jack Gray is a Director at the Paul Woolley Centre for Capital Market Dysfunctionality, Faculty of Business, University of Technology, Sydney, and was recently voted one of the Top 10 most influential academics in the world for institutional investing.

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