One of the main challenges faced by professional investors is that good behaviours are often in direct conflict with our own interests. This is either because our incentives are misaligned – what’s beneficial for the business or my career is not necessarily good for my client – or we feel compelled to meet the erroneous expectations of what good investing behaviour is. This profound dissonance means that there are plenty of things that professional investors should be saying, but really can’t.

Such as:

“Sorry, I am not sure how the market did yesterday, I didn’t check.”

“Yes, this is the second quarter in a row where we haven’t made any changes to your portfolio. I hope we don’t make any all year.”

“You could listen to me talk about inflation, but I am just as bad at forecasting it as everyone else.”

“We are managing too much money, its probably not in your best interests to invest with us.”

“Our recent strong performance is totally unsustainable.”

“I have to admit, we have been incredibly lucky”.

“Our new CEO is really focused on improving short-term performance.”

“The performance fee structure means that I can become very rich, even if I underperform.”

“There really is little value in complexity, you are better off keeping it simple.”

“Yes, I have kept a record of my macro forecasts and trades, would you like to see it?”

“If you want to take a genuinely long-term, active approach, you will have to put up with years of underperformance. Even if we are good.”

“Although I say I have a long-term investing horizon, most of my decision are about keeping my job for another year.”

“To tell you the truth, this merger has been an absolute nightmare.”

“The recent team restructure has changed everything, we have lost some of our best people”

“I have no idea how markets will perform over the next year, and neither does anyone else.”

Although these issues can seem minor and akin to the classic sales activity of any industry – highlighting the perceived virtues of a product or service – there is something more damaging going on here. Incentives drive behaviour and too often the incentives of professional investors are pointed in the opposite direction of their clients.

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My first book has been published. The Intelligent Fund Investor explores the beliefs and behaviours that lead investors astray, and shows how we can make better decisions. You can get a copy here (UK) or here (US).