The Shibboleth Bias: Mistaking Complexity for Competence!
- 2 days ago
- 2 min read
Retirees and pre-retirees face numerous issues in planning. One particular pervasive problem lies in mistaking complexity for competence and the shoptalk often used by the financial industry to “explain” investment strategies.
This financial jargon often masquerades as wisdom. It isn’t.
Financial planning is only as good as the client’s understanding of the plan.
Planning should help people make better decisions- sound decisions require understanding and detailed information.
Yet many clients leave meetings with their advisors feeling confused rather than confident.
What is the Shibboleth Bias?
Historically, Shibboleth was a Hebrew word used to distinguish insiders from outsiders. It actually comes from a story in the Old Testament (Judges 12:5-6) where Gileadites used it to identify the Ephraimites who couldn't pronounce the “sh” sound. Essentially, it was a password to distinguish ally from enemy.
Say it properly and live; mispronounce and be executed.
*I have no idea how many tries one got but hopefully several!
Today, it describes our tendency to equate specialized vocabulary, technical language, or insider terminology with competency and authority. “In the know” vs the outsider.
Often we assume people who sound sophisticated know what they're talking about.
Sometimes they do. Sometimes they do not.
If a financial advisor cannot explain an idea in plain language, they either don’t understand it well themselves or they are relying on complexity to establish/maintain their credibility.
Good advisors translate sophisticated terminology into more familiar language.
The BEST advisors simplify the jargon without the client feeling as though they are being talked down to or sitting in a classroom where the subject is their own finances.
Potential Costs of the Shibboleth Bias
🎤 Advisor is chosen on how impressive they sound rather than the merit of their work.
📦 Products purchased without a full understanding of the cost/benefit.
🔀 Clients accept complicated strategies over simple, yet prudent, investments.
⚙️ Clients mistake activity for progress.
❓ A feeling of intimidation that leads to the avoidance of asking pertinent questions.
Good Advisors Translate; Great Advisors Educate
"Great advisors don't impress clients with complexity. They empower clients with clarity."
Clarity is a fiduciary virtue and sound financial planning focuses on helping people steward their resources wisely to accomplish their goals. The next time you receiving financial advice, consider asking these questions to ensure clarity:
Can you explain this in simpler terms?
Why is this recommendation appropriate for me in my current situation?
What are the trade-offs; What are the costs?
How does this support my long-term goals?
The advisor's objective shouldn't be to sound smart- but rather to ensure people have the info necessary to make informed decisions.
If this resonates with you and you'd like a Champion in your corner, contact me via email at:
or by phone at 360-632-5664.
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