When Obfuscation Backfires

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When Obfuscation Backfires
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When Obfuscation Backfires

October 5, 2015

by Dan Solin

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This Value Fund Generated Significant Alpha In 2021

InvestGrizzlyRock Value Partners was up 34.54% net for 2021. The fund marked 10 years since its inception with a 198% net return, resulting in an annual return of 11.5%. GrizzlyRock enjoyed 14.8% long alpha against the S&P 500 and 26.9% against the Russell 2000. Q4 2021 hedge fund letters, conferences and more The fund's short Read More

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Many advisors are familiar with troublesome questions from prospects. Here are some examples:

  • How do you justify your fees?
  • Why should I pay the same fee every year when most of your work is up-front?
  • Wouldn’t I be better off with a robo-advisor?
  • My bonds don’t earn any meaningful returns. Why should I pay you to manage that portion of my portfolio?

Sometimes these questions go into the technical aspects of investing:

  • What is “factor loading”?
  • Are your bond funds hedged?
  • What is a “t-stat” and how is it used in investing?

How you answer these questions can determine whether you are successful in converting a prospect into a client.

A recent study authored by Barbara Bickart, Maureen Morrin and S. Ratneshwar examined when and why obfuscating helped or hurt the prospects of a sale. Here’s a summary of their findings.

Defining “obfuscation”

“Obfuscation” can occur when you are confronted with a question for which you should know the answer but don’t, or when you know the answer to a question but decide not to disclose it because of your belief that a truthful response will harm your chances of making a sale.

In these situations, you have the following choices:

  • Admit to not knowing the answer.
  • Lie and provide a false answer.
  • Obfuscate by providing vague or confusing information.

Obfuscating has some benefits over admitting to a lack of knowledge (which may erode your credibility) and lying (which, if detected, would be devastating). By obfuscating, you maintain at least the image of responding to and possibly satisfying your prospect, who (hopefully) will move on to other subjects.

But is obfuscation an effective tactic?

It is a common one. The authors of the study found that 70% of participants reported having an experience with a salesperson who used obfuscation.

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