Climateer Investing: Financial Salesmen and the Illusion of Certainty

Monday, March 25, 2013

Financial Salesmen and the Illusion of Certainty

Assuming the illusion of certainty only works if the target is trying to get rich. If your intended is already wealthy either they or their advisers know the only way you can have absolute certitude is if you've fixed the fifth race at Belmont in which case Mr. Bigg may be inclined to ask "Why do you need me?"
For the wannabe or even the parvenu though, I know and can guarantee...

From The Research Puzzle:
the illusion of certainty

The trouble with starting a series on a broad topic like equity research is that it could go on forever. I intended to add more chapters to the series that had been in progress, but I am ending it early because of ten words that I read in a blog posting.

Ironically, the words I read had been written by John Hempton, who was the subject of one of the essays in that series. They are: “In money management what sells is the illusion of certainty.”

I was jolted out of my previous writing plan by that phrase and the one that followed, which said that “a fund manager who tells the truth (the truth being that he may be wrong at any time) is a more-difficult sale but a better investment.” I was not at all shocked by Hempton’s statements; in fact, I realized that in one way or another they reflected a theme that I deal with all the time.

For reference, you should know that I write about and offer consulting services to many different parts of the investment ecosystem. In a world of specialists, I am a generalist, connecting the dots across the industry for the benefit of readers and clients.

So, if “what sells is the illusion of certainty” and I’m working with an asset manager, should I encourage them to be illusionists and add to their assets under management? To craft a narrative that brings in the assets while not fully painting the picture of what they do and what the investor might experience? I’m sorry, I just don’t have it in me....MORE