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

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Latest Updates


Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Survey: share your retirement experiences

All Baby Boomers are now over 55 and many are either in retirement or thinking about a transition from work. But what is retirement like? Is it the golden years or a drag? Do you have tips for making the most of it?


Time for value as ‘promise generators’ fail to deliver

A $28 billion global manager still sees far more potential in value than growth stocks, believes energy stocks are undervalued including an Australian company, and describes the need for resilience in investing.


Paul Keating's long-term plans for super and imputation

Paul Keating not only designed compulsory superannuation but in the 30 years since its introduction, he has maintained the rage. Here are highlights of three articles on SG's origins and two more recent interviews.

Fixed interest

On interest rates and credit, do you feel the need for speed?

Central bank support for credit and equity markets is reversing, which has led to wider spreads and higher rates. But what does that mean and is it time to jump at higher rates or do they have some way to go?

Investment strategies

Death notices for the 60/40 portfolio are premature

Pundits have once again declared the death of the 60% stock/40% bond portfolio amid sharp declines in both stock and bond prices. Based on history, balanced portfolios are apt to prove the naysayers wrong, again.

Exchange traded products

ETFs and the eight biggest worries in index investing

Both passive investing and ETFs have withstood criticism as their popularity has grown. They have been blamed for causing bubbles, distorting the market, and concentrating share ownership. Are any of these criticisms valid?



© 2022 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.