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Persuading people to change their mind about anything is daunting. Trying to convince a prospect to switch from an active to a passive investing strategy can be an uphill battle.

It is crucial to understand the research about what is and isn’t effective.

Positive
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Positive or negative?

The initial choice you need to make is whether to accentuate the positive or the negative. For example, you could show higher expected returns using passive management and link the additional wealth to meeting goals like leaving bequests to family and charity, and maintaining a higher quality of life. That would reinforce the positive.

Or, you could accentuate the negative and use a Monte Carlo analysis demonstrating the higher likelihood of running out of money in retirement using active management, having to cut back on quality of life and maybe even dying impoverished.

Which approach is likely to be more effective?

The clear winner

You would think healthcare workers in hospitals would be highly motivated to follow basic guidelines about hand washing. But according to this article from Berkeley Wellness, “Infections acquired in hospitals, nursing homes and other medical facilities sicken more than a million Americans every year and kill about 100,000 of them, according to Centers for Disease Control and Prevention (CDC) estimates, and cost billions of dollars to treat. Especially worrisome is the fact that increasingly these infections are resistant to antibiotics.”

There’s ample evidence that many of these infections would be prevented by simple hand washing.

Despite this data, the data on non-compliance with hand washing protocol is shocking. In one study, average compliance was only 48%, with even higher rates of non-compliance in intensive care.

One study sought a solution to this problem. Initially, video cameras were conspicuously placed with views of every sink and hand sanitizer in an intensive care unit. Hospital workers were well aware they were being monitored.

Compliance was carefully measured during a 16-week period, but no feedback was provided to employees. Compliance remained poor, measuring under 10%.

The study was then adjusted to provide feedback continuously displayed on electronic boards mounted in the hallways, and summary reports were delivered to supervisors by electronic mail. Compliance shot up to 87.9% and remained there.

Another study offered an explanation for why positive reinforcement is more effective than negative reinforcement. A participant was told that every time he pushed the space bar on a computer when a particular image appeared, he would receive one dollar. He was also told to push the space bar when he saw another image, in order to avoid losing a dollar.

The participant was far more adept at earning a dollar by rapidly pushing the space bar than he was at avoiding the loss of dollar when that image popped up.

In her book, The Influential Mind, author Tali Sharot explains that our brains are programmed to move forward to gain a reward, but to withdraw when we sense the possibility of something negative occurring by inhibiting our response.

Shalot concludes: “If you want someone to act quickly, promising a reward that elicits an anticipation of pleasure may be better than threatening them with a punishment that elicits an anticipation of pain.”

Read the full article here by Dan Solin, Advisor Perspectives