What advisers can learn from ‘Weinergate’

Surprisingly, the political scandal offers some lessons on how advisers should treat clients

Financial advisers who watched news clips of yesterday’s teary press conference probably didn’t learn more than the rest of us about why Rep. Anthony Weiner (D.-N.Y.) behaved so stupidly.
But if they were observing carefully, advisers may have picked up on the golden rule of public relations: when the bad stuff hits the fan, don’t evade, don’t lie and don’t get hissy with the press.
Rather than put up a phony front, as Weiner did, it’s best to reveal … uhm … all of the bad stuff yourself, apologize profusely, vow to reform and disappear for a while.
Financial advisers honestly trying to do a good job for their clients need not worry about overcoming Weiner-level transgressions. It’s more about promises gone sour through no fault of one’s own. But before I get to the PR advice for that, let’s look at some underlying dynamics.
For public figures boasting enormous egos — politicians, celebrities and top corporate executives come to mind — there’s an unstated assumption that they have attained positions of prestige as a result of some unusual talent, ability or brains. Because we ascribe special attributes to those whom we shower with power, we also expect them to behave appropriately.
Sure, we give Lady Gaga and other pop stars a lot of leeway, but “serious” personalities like politicians are held to a higher standard. Fortunately, we’ve come a long way from the days when a governor couldn’t run for president because he had been divorced (Nelson Rockefeller), but we still believe that there’s something unseemly about a governor (Arnold Schwarzenegger) fathering an illegitimate child almost under the roof shared by his wife and family.
In the case of Weinergate, we had a politician who made a name for himself as a result of his argumentative personality, his presumptive way with opponents and his cocky self-assurance. When we learn that this holier-than-thou bully was tweeting come-ons to young girls, the justification for his power evaporated. The emperor, literally sitting there without clothes, is revealed to be a liar who violated the public’s trust.
Nothing so dramatic usually transpires in the world of financial advice.
In the advisers’ world, the underlying assumption at play is that advisers know more about investing than do customers. If one follows that logic to its natural conclusion, advisers knowledgeable about investing and markets should be able to foresee changes in the economy and the markets, which should enable them to generate profits for their clients.
That assumption, of course, is illogical; no one knows the future. But the psychological “deal” most investors make is the following: “I’m paying you because you know more than I do and you’re going to make me money or at least make sure I don’t lose anything.”
When markets are going strong, the tacit deal works fine. When markets tumble and the deal is violated, advisers lose clients’ trust. They then often lose clients.
In order for advisers who really try to do well for their clients not to fall victim to the emperor-without-clothes syndrome, every effort should be made to be transparent and communicative about economic and market assumptions. Every chance they get, advisers should tell clients where they think the economy and the markets are at the moment and where they think things are headed. And like good sailors, if the wind changes direction, advisers must be ready to change their tack and communicate their reasons for a shift in plans.
As one nation under Oprah, most of us Americans have big hearts and will forgive practically anything. We give second, third and fourth chances to those who admit their mistakes, make amends and try to do right.
(I’m sure that advisers who are too early in their accurate warnings and lose customers as a result will have some colorful comments to contribute).
Anthony Weiner blew his chances for an easier second chance by being haughty and lying.
Advisers can earn second chances far more easily: be open about where you’re going, be open about how you’re getting there, and be open to changing direction — and explaining the move — when you feel it’s in your client’s best interests.