Financial Planners: Lying or ???

Here’s how emotional skills and lie detection help you get better service at cheaper prices from financial planners.  I went from paying close to $20,000 a year for a mix of high-powered, low-cost funds to paying only $3,000 a year for better service.

Background: of course, Vanguard saves you money, but you can probably get a better deal through DFA funds because they invest in smaller, more underpriced (“value”) stocks.  I complained about my $20,000 in fees, but my old advisor, Jeff Harwood, of  Ventura Advisors, said it was worth it for the better funds.  He said I could only get them on my own.

But that wasn’t the whole truth.  He emphasized I’d need an advisor, and most charge 1 per cent or more of assets.  When we spoke, he didn’t betray any signs of microexpressions or concealed emotions – neither the negative emotions of contempt and disgust one sees with angry con-men nor the slimy duping delight microexpressions one sees in poker bluffs.  We even met in person, and I didn’t find any other signs I  study to detect deception.  Alas, the microexpressions aren’t the whole story.

Jeff may not have been “lying” if we  think that means, as Paul Ekman does, deliberately trying to mislead someone. Instead, Jeff simply didn’t let me know that other advisors charged much less.

This time, the truth didn’t come from microexpressions or Paul Ekman.  It came from our old hero, Ronald Reagan: “Trust but verify.” One day, I simply ran a search on low cost advisors and DFA and found a list of a half dozen or so who charged less than the $20,000.

From that list, I interviewed a few and settled on Steve Evanson.  It didn’t hurt that Steve knew about Paul Ekman and microexpressions.  He’s a statistics whiz and trained in academic psychology.  He usually charges $2000  a year only but charged me $3000 because I have my own money and a trust I manage with money for my sister.

Lesson one: microexpressions and other tools may work for catching liars, but sometimes one needs to rely on negotiation basics.  And one key lesson I teach is to always keep looking for alternatives that may be better.

But there’s a second lesson here, too: why didn’t Jeff just meet the price that Steve Evanson offered?  After all, negotiation basics teach that people should accept anything that’s better than the alternative.  Clearly, I was ready to bolt for the $17,000 less.  And I explained this to Jeff very carefully and showed him the alternatives.

His last gambit: “You like a lot of hand-holding, and I don’t know if you’ll get that.”  Alas, wrong there, too: I like money, not hand-holding.  When I talked to Steve about a new way to hold commodities – the exchange-traded note – he new about it right away, as well as tax problems the IRS might create with it.  When I talked to the pricier Jeff, he didn’t know about it, but got back to me.

Why did Jeff give up on $3000?  After all, his kind of advisor just does buy and hold.  I’ve taught classes on lie detection and emotion for several years with Mike Wheeler at Harvard Business School, and I asked his advice.  He thought it was identity: Jeff must have been insulted at my “haggling” because he might think that professionals don’t negotiate.

That’s a possibility.  Often, people may end negotiations when you violate their “script” or expectations for the negotiation.  And that’s why microexpressions can be so important.  When we push too hard, we can see suppressed anger show up in a slightly narrow lip or eyebrows that come and go apart in 1/30 of a second – the classic microexpression that Paul Ekman discovered.  I didn’t see that in person, but maybe I could have seen it if I negotiated with Jeff in person.

Here’s a link to a pdf of a book chapter I did on identity, awareness of emotion ad negotiation for a book by Harvard’s Project on Negotiation.  What do you think? Jeff, if you’re reading this, what do you think happened?