Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 75

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.


Leave a Comment:



'Do nothing' is good financial advice worth paying for

Eight steps to expect when seeking financial advice

What is robo-advice?


Most viewed in recent weeks

Unexpected results in our retirement income survey

Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

Three all-time best tables for every adviser and investor

It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.

The looming excess of housing and why prices will fall

Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.

Five stocks that have worked well in our portfolios

Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.

Six COVID opportunist stocks prospering in adversity

Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.

Latest Updates


10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?


Sean Fenton on marching to your own investment tune

Is it more difficult to find stocks to short in a rising market? What impact has central bank dominance had over stock selection? How do you combine income and growth in a portfolio? Where are the opportunities?


D’oh! DDO rules turn some funds into a punching bag

The Design and Distribution Obligations (DDO) come into effect in two weeks. They will change the way banks promote products, force some small funds to close to new members and push issues into the listed space.


Dividends, disruption and star performers in FY21 wrap

Company results in FY21 were generally good with some standout results from those thriving in tough conditions. We highlight the companies that delivered some of the best results and our future  expectations.

Fixed interest

Coles no longer happy with the status quo

It used to be Down, Down for prices but the new status quo is Down Down for emissions. Until now, the realm of ESG has been mainly fund managers as 'responsible investors', but companies are now pushing credentials.

Investment strategies

Seven factors driving growth in Managed Accounts

As Managed Accounts surge through $100 billion for the first time, the line between retail, wholesale and institutional capabilities and portfolios continues to blur. Lower costs help with best interest duties.


Reader Survey: home values in age pension asset test

Read our article on the family home in the age pension test, with the RBA Governor putting the onus on social security to address house prices and the OECD calling out wealthy pensioners. What is your view?



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.