Zero calorie lemon top please
Remember Newton’s 3rd law of motion? No? It’s the one that says every action has an equal and opposite reaction. It’s a law of physics – that’s just the way it is. So, what’s this got to do with zero calorie lemon tops? Everything!
The greater the return, the greater the potential risk
You’ll find the laws of investment physics are pretty similar to Newton’s 3rd Law. The greater the level of return you want, the greater the potential risk and volatility. Just like equal and opposite reactions, they are directly proportional. And you just have to accept it – you can’t have one without the other. But not everyone gets that, at first.
Your client can’t have a 12% return for zero risk
We’ve all dealt with that client, haven’t we? You know the one. The one that doesn’t want to hear all that stuff about how a greater return means greater risk. They just want you to say, “Of course I can get you 12% return each year, with no risk!” Why? Because that’s what their mate, Dave, said they can get. And that’s what Roy said – and he’s massively into Bitcoin.
As a planner and coach, it can be tricky to explain – you’ve got to walk them through the laws of investment physics, and hopefully they get it. Hopefully they accept that it all makes sense.
But some just don’t get it. I’d almost go so far as to say they refuse to get it. And this is the point. Sometimes you just can’t get through to them – there’s no way to do it. It’s not as easy as explaining Newton’s 3rd Law – you can’t just punch them on the nose to demonstrate! So you often end up with a client who just repeats themself, and goes on and on about wanting a great return for zero risk.
It’s reminds me of my grandad, ordering a zero calorie lemon top
Do you know what illustrates this point perfectly? My grandad, back in the 80s. Whenever we went abroad, he could never understand why people would speak a different language. He just couldn’t get his head around it. He’d march up to a cafe and say in English, “2 ice creams please – 1 chocolate and 1 vanilla with a lemon top.” And they’d look at him, puzzled – with absolutely no idea what he was saying.
My grandad would look equally puzzled and repeat his order – shouting louder, slower and with considerably more gesticulations (always helps?!). He refused to believe that they didn’t understand what he was asking for, so the only way he could think to get what he wanted was to keep asking, shouting louder and slower. He just couldn’t accept that repeating the question louder and in English wasn’t going to get him what he wanted. He was never going to get his lemon top – they don’t even have lemon tops in France…
As for the zero calorie bit? I’ll tell you now, if you do ever manage to buy a vanilla ice cream with a lemon top – don’t get a zero calorie one. Just like Newton’s 3rd Law, you can’t have an amazingly creamy ice cream with that zingy lemony top without the calories – flavour…calories…directly proportionate.
Tell your client the truth – not what they want to hear
That client who keeps telling you they want 12% return for zero risk? I’m afraid they’re a bit like my grandad. They’ll just keep on at you, and I’m pretty sure they genuinely believe that if they keep telling you they want a 12% return, you’ll eventually give in and say, “okay then, I finally understand what you want. Yes, you can have 12% return for zero risk…”
But it’s never going to happen. You’re just going to have to tell them the truth. So, ask them this: “Do you want me to tell you the truth? Or do you just want me to tell you what you want to hear?
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