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Helping Investors Measure Progress and Stick to Goals

By Eric Daugherty

Asset management firms currently have a huge opportunity to help investors help themselves. In the process, the firms stand to win the loyalty of customers long-term.

As anyone who's tried to lose weight, train for a marathon, or reach an audacious goal knows, one way to motivate yourself is to publicly proclaim the goal. Then, the real or perceived power of peer pressure and a supportive community come into play. When I ran one of my first marathons, I proclaimed my time goal to friends and family very broadly. When I was suffering during the race, the thought of my support group tracking my progress online, and the fear of letting them down, was powerful motivation.

However, support only helps when we are willing to reveal our current situation and our goals. This motivator never comes into play when it comes to finance, because we keep our situation so closely guarded.

I ran across this interesting article that highlights a NetworthIQ, a site that encourages sharing one's net worth with others; one goal of that comparing with others may spur more positive saving and investing behavior. The notion of baring our income, net worth, or lack thereof with others seems so radical. But, with American savings rates so low over the last few decades, and millions unprepared for setbacks and/or retirement, I can't help thinking that we would be better off with more comparisons, support, and information.

Perhaps asset management firms could and should play a role here. We already trust them with information regarding our finances. My primary financial institution knows a lot about my earnings, my wife's, our net worth, savings habits, and how we compare to others "like us" (age, income, family size, etc.).

As a financial planner, I know that the best financial advice most people need is "Save More". Yet, motivation for saving more, thus far, needs to be intrinsic to the individual. Tools such as stickk.com, Quicken, and mint.com, help one create and monitor goals, help to make goals visible and trackable, but they still rely on "self-reporting".

Most people know they need to save more, yet they don't do it. In How We Decide, by Jonah Lehrer, the author gives many examples where our emotional brain frequently overrides the rational brain. To make more rational financial decisions, we need more information, motivation, and support. Asset managers could be doing a better job providing all of these to their clients. If Amazon can tell me what books I'm apt to like, why aren't my asset managers telling me how my portfolio or savings rate compares to others like me?

While I do not think we will see everyone disclosing his or her net worth online anytime soon, I do hope that we will see burgeoning communities to support good saving and investing behavior, and I hope we will see asset managers supporting clients with more tools for comparing their behaviors to those of the broader public.