The Misleading Outcomes That Can Arise From Adopting Best Practices

Harold V. Langlois

The major questions every financial advisor will have to answer over the next several years goes something like this…”How should I structure my business strategy to respond to both the threats and opportunities presented by AI? Is there a role for a technology platform partnership to integrate all interfacing elements of my clients’ financial activities? How do I plan for a future set of events when I don’t understand what technology challenges have in store for our industry? How do I get from here to there when I don’t know where “there” is?”

Before starting to address these perplexing questions, let’s begin by asking how you presently assess the quality of your practice. Do you feel that you possess expert human resources within your practice, and do you service a superior base of clients? If the the answer is “yes” to these two assessments then you should see AI as a “nice to have” addition to what you presently oversee. Best practices in this situation would call for hiring part time consultants who focus on specific technology projects that would increase client connectivity. You need to avoid altering the way you presently deliver your value proposition. It would be a major tactical error to lose focus based on the fear of becoming technologically obsolete. There is already an overwhelming amount of “noise” in our daily lives that compromises sound decision making and the ability to focus on what your clients deem significant.

Using AI to develop better data collection processes that produce superior predictive modeling should not alter how you presently serve clients within your current advice model. It’s crucial to avoid the temptation to rely upon the technology that drives these algorithmic outputs as a substitute for the trust and interpersonal interactions that serve as the foundation of your advice proposition. It’s the human element and the development of relationships that permit clients over time to reflect on what they have learned, and how their behavior has remained in alignment with their overall goals. Believing that an outside mechanistic force can create meaning by planning for a client’s future has for years captivated the imagination of science fiction writers. Even if we were to consider it possible why would we want to pursue that path?

So, if you are on the top of your game, and your day to day activities have coherence, then look to increase your focus on what is important and don’t become seduced by the next flashy IT promises.

Most consultants make their living using their education and experience to inject best practices, whether from a technological platform or from a traditional human resources perspective. This usually helps the group at the bottom or in the middle to improve, but “best practices” by definition are a derivation of “what works on average.” To go from good to great has very little to do with adopting an average approach. When contemplating the challenges of building a great practice and helping clients in uniquely personal ways, you should spend very little time chatting with Watson or his artificial equivalents, looking for advice that emanates from behind the curtain in the Merry Old Land of Oz.

The conceptual underpinnings of what can be derived from following an organizational model based on “Best Practices” has its weakness in how these suggestions are formulated in the first place. In a May 2017 Harvard Business Review article by Jerome Barthelemy, “Does It Pay to Hire Consultants? Evidence from the Bordeaux Wine Industry,” he makes the point that wine consultants develop best practices by looking for generalizations of activities that will have a positive net result on the quality of the wine being produced. Barthelemy notes that “Because best practices are more tested than the practices of individual firms, they decrease the likelihood of very low performance. On the other hand, uniqueness is a necessary condition for outstanding performance. Because best practices are less unique than the practices of individual firms, they also decrease the likelihood of very high performance.” Using this wine metaphor, when you have something special that outcompetes a very large field of “wannabe’s” stay with the inborn talent and avoid the “generalist” orientation of adopting corrective approaches to something that is unique and special, and avoid trying to be slightly above average.

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