Playing Small Ball

"Is that it?"

I suspect you’ve heard a version of this phrase at least once in your career. It usually makes an appearance after you offer a recommendation to a client. They were expecting the financial equivalent of a home run, and all you did was get them on base.

Of course, it doesn’t matter that your recommendation is in their best interest. They’ve been trained to believe that big plays are the only way to accomplish investing success.

It’s not a surprise that clients come into your office expecting a show. Maybe it’s because financial industry advertising rejects some sort of idealized experience. There’s also those stories they might hear from a friend of a friend about an investment that comes with zero risk but high returns. Whatever the cause, the result is an individual investor with a very skewed perspective of investing.

One of the best examples has to be a client who called me several years ago. He had just read a story about one of the university endowments and what a great return they’d generated for the year. "Why aren’t we doing what they’re doing?" he asked.

To be clear, this client was a smart and successful guy, but he truly believed that he could invest like a multibillion-dollar endowment. He didn’t see the difference and, as a result, wanted to pursue a strategy that did little to support his goals. But it sounded like such a great idea!

Helping clients understand these differences remains one of the hardest tasks for financial professionals. It gets particularly tricky when we’re suggesting, to continue with the baseball analogy, that they play small ball. 

A small-ball strategy doesn’t focus on rare, showy, and hard-to-predict events, but on making small, relatively easy-to-repeat moves that compound into positive results over time.

It’s a hard strategy to advocate when the client is expecting something big and bold. But that’s the point.

The reason you have a relationship with your clients is to make recommendations and provide advice they might otherwise overlook. Without your guidance, they’re much more likely to swing for the fences every time without understanding that the odds are against them.

Plus, it can be scary.

If clients are constantly saying, "Is that it?" you may begin to wonder how long you’ll still have clients.

As a result, it might be tempting to throw a few "exciting" options into the mix to keep clients engaged. But what happens when those options don’t work out as expected?

It may feel and sound counterintuitive, but the more boring you can make the investing experience for your clients, the better off they’ll be. If you think I’m exaggerating, just think back to the last time the markets took a dip. I very much doubt that when clients called they were happy about what was happening.

Which brings us back to helping clients play small ball.

When investors embrace a small-ball approach, it’s much easier to handle the market roller coaster. In large part, it comes from no one thing being a make or break event for investors. Instead, they’re focused on goals like consistently saving money every month, rebalancing when the markets require it, and aligning their capital with their values.

All of these actions are small ball in the investing world, but they continue to deliver results.

By taking the time to help investors understand the benefits of small-ball investing, you’re helping them better understand why they’ve chosen to work with a financial professional.

It’s not because you can time the market or pick the next "hot" stock. It’s because you’re invested in their long-term success, and that’s something every investor can appreciate.

If you liked this article, I think you will LOVE what I am building at The Society of Advice.