In this episode of Simple But Not Easy, we’re joined by Ryan Murphy, Morningstar’s Global Head of Behavioral Insights, to explore how financial advisors can help clients set better goals, avoid costly mistakes, and build lasting trust. We discuss why goals—not asset allocation or stock selection—should be the true starting point of an investment journey, and how a simple multi-step framework can uncover what really motivates clients. Ryan also shares insights from Morningstar’s Mind the Gap study, which shows how investor behavior often drags down returns, and explains how advisors can reframe conversations from performance to progress. If you want to better understand what drives investor decisions and how advisors can make the biggest difference, this episode is for you.
(Stay tuned for additional important disclosure information at the end of this episode.)
Nicholas VanDerSchie: When it comes to investing, we often jump straight into asset allocation, investment selection and portfolio creation. But what if the real starting point should be something much simpler like setting goals. In today's episode, we'll explore why goals matter, why investors often get them wrong and how advisors can use goal setting conversations to build stronger, lasting client relationships.
This episode also connects directly to one of Morningstar's most important annual research pieces, our Mind the Gap Report. Every year it shows the same sobering truth. Most investors underperform the very funds they invest in. That's not because the funds themselves are broken, but because of behavior, usually in the form of buying and selling at the wrong time or chasing performance. So, today's conversation is about finding practical ways to help clients sidestep those mistakes from setting goals that truly matter, turning them into actionable steps, and using them as a foundation for trust. Let's close the behavior gap and help advisors elevate client relationships.
This is Simple But Not Easy, a podcast from Morningstar's Wealth Group where we turn complicated financial developments into actionable ideas. I'm Nick VanDerSchie, head of strategy and execution for Morningstar Wealth, and I'm delighted to be joined by Morningstar's head of behavioral insights, Ryan Murphy, who will help us dig into the topic.
Before we get into the conversation, if you'd like to know more about how we support advisors, we welcome you to email us at simple@morningstar.com or me directly at Nicholas.VanDerSchie@morningstar.com.
Now, let's get started. Ryan, welcome to Simple But Not Easy.
Ryan Murphy: Thank you. Great to be here.
VanDerSchie: So, I know you've been on the show before, but not for a while. Really appreciate you spending time with us, and it's great to have you back on. Maybe before we jump into the conversation, can you tell our listeners more about your role at Morningstar and your team?
Murphy: Sure. So, I have an academic background somewhere between psychology and economics, and so, studied to help people make decisions about risk, money, and investing. And so, with the rest of the behavioral science group, we investigate these things and try to think about not only the kinds of mistakes that people make and the biases and irrationalities, but ways in which we can structure interventions and ways to help irrational decision-makers make better choices, and to take all that research and make it accessible, not only to investors, but the advisors who are trying to help them in the journey.
VanDerSchie: All right. So, the best place to start is always the beginning. So, let's start exactly there. Why goals matter in the first place. And before we talk implementation, it's probably important to understand what makes goal setting worthwhile and why so many investors often find themselves stuck before they even get started. Ryan, your research shows that the majority of people struggle with the basic question, what are your goals. What would you tell us about that research and why is this happening?
Murphy: Sure. So, why it matters? I mean, to quote the great thinker, Yogi Berra, if you don't know where you're going, you might not get there. And the idea of goals then is just foundational, is fundamental to how investors should approach the problem, how they think about it, and why they invest in the first place. And it turns out what are your goals is one of those really easy questions that's easy for people to get wrong. And so, that's some of what our research has shown in the last years, is how this is a very difficult question and counter-intuitively so.
And so, we dug into this a bit more in a couple of pieces of research, one of which we'll talk more about today, gets into the details of how you can help people answer this question more effectively and be able to actually get into what motivates them. And it's a three-step process and we can certainly go through the details of that.
VanDerSchie: Yeah, let's jump right into it.
Murphy: Sure. So, I mean, step one of it is really straightforward. It's the sort of thing that advisors are accustomed to, or you an investor, you know, tell me about your long-term overarching financial goals. And people start to write some things down here very much top of mind, sort of using, you know, just pencil and almost brainstorming their way through this. What we've done is we say, okay, let's take that as just step one, set that aside, this takes people about three to five minutes or so, and then get to step two. And step two is where really the magic happens. And this is where there's a structured checklist that people have and they can look through. And all you're asking the person to do is to look through it and to see if there's anything on that checklist that they really like and to mark that off, or if there's anything on there that they really don't like and they scratch that off, right? But they're doing essentially bucketing things. They really like it, they're indifferent, they don't care for it. And this process again takes about three to five minutes.
And then the third step of the process is you ask them, okay, now that you've gone through these two things, now start to tell us what your overarching long-term financial goals are. And if people were perfectly rational and understood their preferences perfectly, then you'd expect the answers on step one to be identical to the kinds of answers you'd see on step three. But that's just not what we find. There's a mismatch, and that mismatch is indicative of people struggling to answer this simple but not so easy question – what are your goals?
VanDerSchie: So, I want to come back to the checklist later in the discussion, Ryan, but I also want to touch on your view here. What are some of the common behavioral biases that you think interfere with accurate goal identification? And based on your work and your research how do you get past those roadblocks?
Murphy: Yeah, absolutely. So, I think one of the heuristics is availability. So, what people have that's top of mind easiest to recall is where their attention goes to first. And that's it. That's all the further they go. And so, it's really easy to have sort of things top of mind and think about those. But what are your long-term financial goals is often operating at a very different level. So, most of our attention on a daily basis is about where's my cell phone, what email do I need to send, where my car keys, all of these sorts of super important things. When really, when you ask a person what your overarching goals, you're now asking them to think in a much longer time perspective. And that's not easy to do.
People don't want to look dumb, right? So, they say something. And it's not that they're lying. They're not trying to mislead. They just don't typically have the ability to make reliable answers on these really important questions. It's just not where their attention is.
So, your question was, how do we get around this? Well, part of that is this process of giving people, that step two is that checklist, of giving people more time and a structure to think about what they're trying to accomplish. And part of what's going on in that checklist is a little bit of a disentanglement. So, when you ask people what your goals, they have to do a couple of things cognitively. They have to generate what their goals could be, and they have to evaluate how much they like them, or if they like this more than that. And if you've ever tried to text and drive at the same time, you know, how difficult it can be to do two things at once. Neither of those two things by themselves is hard. Driving is not that hard. Texting is not that hard. But together they really get in the way of each other.
In the same way, I think that's happening here when you ask people what are your overarching long-term goals, they're having to do all of this cognitive work, and it starts to muddle the process. By having there be a structure and a checklist to this, this gives people more time and cognitive space to be able to address these problems, and in doing so, generate insights about themselves as to what really drives them.
VanDerSchie: Ryan, I'd be interested at, in your experience, do you see these challenges – do you see them as more amplified the further away people are from retirement, or can they get challenging even as folks are approaching their retirement years?
Murphy: I think that it's enduring in the sense of what people are trying to accomplish. And I think that when the timescales are longer, when you're talking about people at the start of the journey, they're trying to think abstractly about 35-year problems, whereas people on the cusp of retirement, it's right there, facing them. But it's still a very difficult question for people to answer as to what they're motivated by and what drives them. And there's some examples we'll talk about more as we get into the research of the sorts of things people say off the top of their heads, versus what really is going on underneath the surface, and how advisors should be able to penetrate through and understand deep down what's driving people.
VanDerSchie: Got it. So, Ryan, I'm sure you've heard the Howard Marks quote, not everything that can be counted counts, and not everything that counts can be counted. Point being, there's a lot of subjectivity involved. After all, we're dealing with humans here. So, do you think this is something that advisors need to account for? And if so, how should they approach it?
Murphy: Yeah, absolutely. So, there is. There's certainly subjectivity going on here and a lot of emotion. And this is a very human thing, asking people what their goals are and what their motivations are. But good goals reflect both of these. It has to reflect subjectivity and that different people have different goals and drives, and that's good to be able to identify those things. And they should be emotional. I mean, these are sort of long-term, high-stakes decisions people are making with their life savings. And no doubt, that's going to be emotional.
One example, we have like, in our research we asked people what their goals were. In step one of the process, this person writes down, and I'm quoting here, wrote down incidentals. I don't really know what that means. I know what the word means itself, but I think the person is just saying that they expect that they're going to have bills into the future, which is a pretty safe bet, as it turns out. So, they go through this process, the checklist, and so on.
And then by step three, same person is asked the question – what are your overarching goals? And they write, and quoting again, not to be a burden on my children. And that to me is fascinating. In about three to five minutes or so, this person is able to express something much more insightful and very emotional and something that is not immediately easy to account, right? But it's a strong motivation. And I think that's an excellent starting point for advisors to have to say, okay, tell me your story, where this comes from. And then let's start to think about things we can do today that can put you in a position so that that's not going to happen. And so going from kind of the vague, the fuzzy, the emotional to the concrete, and how do we start to develop an investment plan and a cash flow management plan that can make sure that we accomplish these goals.
VanDerSchie: That makes good sense, Ryan. And speaking of what actually counts, I know your team has done a lot of work on what clients truly value most in a financial advisor. And what I'd like to do is share the top four responses with our listeners, and it would be great if you could provide your thoughts on each, okay? So, coming in at number four in terms of what clients value most about their advisor is maximizing my returns. What's your take on that one?
Murphy: Well, to me, that was surprising. That was kind of a record screech when I read that because it was a hold on. Now, that's not really a goal, right? That's a means to a goal. And the fact is that the vast majority of investors don't have portfolios that are designed to maximize returns. A lot of portfolios have a fixed income component to try and smooth things out. Lots of people don't want to have portfolios that are heavy in equities as they get closer to the cusp of retirement. And so, this to me struck me as a very superficial response and also a little bit of a misunderstanding of what a good portfolio does.
And so, I think if an advisor hears that, it's worth having a conversation about what this means. Because we don't necessarily – you can have a really good, well-constructed portfolio that serves the client's goals, but it's not designed to maximize returns. And it's worth having that conversation up front so that the client understands what they're actually geared for accomplishing. Because if not, then that could be setting the stage for disappointment.
I mean, really what we're after here is thinking about a goal as having the money that a client needs when they need it. And that may not require an aggressive portfolio. So, when I saw that, I thought, okay, this is interesting and it's worth – that is a really good injection point for advisors to start to talk to their clients about what their portfolios are designed to do.
VanDerSchie: Okay, number three on the list in terms of what clients value most about their advisor is keeps me on track.
Murphy: Yeah, and I think that's really related to the next one as well. These two kind of cluster together in line, which is, keeps me on track and helps me reach my financial goals. And this was great. So, the language around keeps me on track is already goal centric. This idea that an investor has a destination in mind and direction in mind, and that's where they're trying to go. And this is all about financial goals. And I think that that was really reassuring for us to see and the sort of way that we would like to see investors think about investing as a goal seeking process. So, I thought that was really good. And so far that advisors can use that kind of language with their clients, talking about keeping them on track, I think that resonates with a lot of kind of good behaviors we want people to take on as they invest.
VanDerSchie: No, it makes good sense. And you mentioned number two there, which is, helps me reach my financial goals, so very related to three. And then, at last the top response, the things that clients say matters the most about their advisor is that they deliver advice I can rely on. Break this one down for us, Ryan.
Murphy: Right. So, this was a paper we did recently in about the last year or so where we were trying to aggregate across a lot of different pieces of research we had, and we use this as an umbrella term for a lot of the things that people were talking about that they were seeking when they looked for financial advice. And part of that comes out of people have a lot of discomfort with financial issues and so they're looking for an advisor to help them work through that discomfort and those feelings of uncertainty. And I think that that's worth highlighting that many of the things that we looked at when people were talking about why they hired a financial advisor, very much resonated with that discomfort. And also, there's a recognition of expertise and people recognize that there's an asymmetry of knowledge and when they're hiring advice what they're looking for is expertise in this domain. And so that's something advisors can offer as well.
But all of that is bound up and under the umbrella of trust. And that's a really important and a key driver of people willing to and engaging with their advisors is that they trust that their advisors are doing what's in their best interest. And in one piece of research we had that jumped out head and shoulders as a finding above the rest is that people were looking for advisors that had their best interests at heart. And that for us was a great opportunity for advisors to be able to talk to their clients about what it means to be a fiduciary and how that entails trustworthy advice.
VanDerSchie: You know that makes good sense. On top of kind of the conversations around the fiduciary responsibility is there anything else that you've seen advisors do that's been particularly effective in terms of demonstrating trust to clients?
Murphy: Well, I think just confronting the issue. I think that having advisors explain how they are compensated can be a useful discussion. There's something called the curse of knowledge where we – in the industry we know all these specialized terms and we talk with others in the industry we use this jargon like a fiduciary to us. We know what that means. But many clients may simply not know what that entails and it's worth, I think, I think advisors having a direct conversation with their clients about what that means and why their advice can be trusted. There's not ulterior motivations at work here and ultimately this isn't charity. Advisors are doing a job and here's how the advisors are paid. And so, I think that once that is made more transparent, that helps investors understand where the advice is coming from and makes them more willing to trust their advisor as they give advice.
VanDerSchie: That makes good sense. While we're talking about the work that advisors do, I did want to ask you about the AI displacing human jobs narrative across many industries right now. And based on this discussion it sounds like advisors probably still have the edge over robots. Would you agree with that?
Murphy: Yeah, I mean, there has been a tremendous amount of ink spilled in the last years with the advent of generative AI. And this has been fascinating to see and there's some really neat advances that are coming along that I'm excited about. But there's always a bit more hype than there is substance and some of it really very much is hype. So, I think there are things that these new systems and these AI systems can do really well and that's great. And some sort of stuff that's mid office or back office, the more that advisors can offload their demands to that and spend more time with clients, there's good evidence that that really pays off a lot in the long run. And that is an area where we don't see AI being particularly skilled yet. AI is not really asking good questions. The training sets for AI are based on average data, right? It reads everything it can, but good advice is very idiosyncratic and tailored specific to what the client needs and is looking for.
And lastly, there's this notion called theory of mind, which is that I have a mental model of what motivates you or motivates another person. And good advisors are very keyed into this to be able to have a good theory of mind of what's driving their clients and understanding the world from their perspective. And that's something that advisors can leverage as they better understand their clients and importantly help clients better understand themselves. And that's something I just don't see AI doing particularly well yet.
VanDerSchie: Okay. So, getting back on topic, major takeaway for me is that goal setting should serve as the true North Star and everything else kind of falls in line after that. And I think this is timely because Morningstar just released its annual Mind the Gap report which shows investors on average underperform the funds they invest in by 120 basis points. And the gap exists across all asset class categories. So, Ryan, first, for listeners who may not be familiar with the report, can you share what's going on here and then secondly, would love to get your take on how the findings can be explained from a behavioral perspective.
Murphy: Sure. So, the report – I mean, you highlight this is one of the Morningstar's long-standing pieces of research showing that there's an enduring gap between the amount of returns that could come from investments and the amount of returns that are actually realized by investors. And part of what's driving that gap is people fiddling with their portfolios, trying to time the market, responding to different changes of price. And that necessarily leads to poorer performance, right?
And there's an older behavioral finance paper that's a classic in the area that's entitled Trading is Hazardous to your Wealth, which I always thought was very clever. So, Barber and Odean had this amazing data set where they looked at how people managed their portfolios. And they have this beautiful figure right in the middle of the paper, which is, it's just so straightforward and simple, and it breaks people up into five categories based on how much they fiddle with and change and adjust their portfolios. And there is an unmistakable pattern that comes out of it. The more that people are turning over and turning their portfolio, the worse their returns are. And it's really clear evidence that people are not good at timing the market and that churning is costly, and that if people are looking for a high effort way to destroy value, then this is a way to do it, churning your portfolio a lot. That's, I think, part of what we see in this report coming from Morningstar, again, is that there's just some bad behaviors that persist in the marketplace of people churning or tweaking their portfolio, trying to time the market. And this just doesn't work very well.
VanDerSchie: Thanks, Ryan. We'll make sure to include a link to the Mind the Gap report in the show notes. Ultimately, goal-setting is a great way to reduce or potentially even eliminate some of that investor behavior that isn't good, you just mentioned. Are there benefits that you can point to for advisors that deliver a great goal-setting process for clients?
Murphy: Yeah. So, when talking to advisors about how this can be effective as they're talking with clients, there's this interesting framing that goes on. And so, some advisors are talking about investments and that their investments are designed to, like, say, beat an index or beat the market. And that's a very difficult frame to try and get people to think long-term and engage properly as investors. And rather, it makes a lot more sense to talk about investing as a goal-satisfying process. And so, when advisors check in with their clients, it's not a performance report because the performance is what the market did to you. But think of it as a progress report. What are your goals? How much closer are you to your goals based on where you are now?
This is a really great way to naturally reframe the discussion to make it from short-term, what the market just did, to long-term, their goals, and a natural way to try and nudge people to take this long-term perspective. And that, I think, is very valuable because we're a long-term investment shop. I believe it's the right way to think about investing. And if you can start to change the mindset that people have in terms of the timeframe, that helps line up a lot of smarter behaviors otherwise.
VanDerSchie: Ryan, I know there's a lot of chatter in the industry around some of the financial technology providers, especially the ones that have made their living delivering quarterly performance reports that advisors use with clients. There's been some demand from advisors to transition those to reports that could be used around progress to goals, as opposed to progress to performance. What are you hearing on this topic? And has anyone really done a good job here?
Murphy: What I hear is that advisors who do this with their clients find this to be a very valuable way to frame the discussion. It's the sort of thing that's more meaningful to their clients. It helps them dig in and understand why they're doing what they're doing. It's personalized. It's tailored to what the investors are trying to do as well. But it's harder because what it requires an advisor to do is not only pay attention to what the markets are doing and what the portfolios are doing but also have a really good idea of what the goals are of the client and just start to square those two things.
And so, it's really easy to talk about, well, here's what your portfolio did in the last quarter and that's that. That's just an investment perspective. But it becomes more meaningful, albeit it's harder to answer, well, here's what the implications are for you, dear client, as you're trying to get closer to your goals. So, what I hear from advisors is that this is a valuable way to frame the discussion, but it's obviously harder. But there's lots of things that can be done from a technology standpoint to try and get as closer to this. In terms of seeing people who have done this well, not yet. And I think that there's a lot of blue-sky opportunity to think about how we can make goal-centric investment planning a key offering in what differentiates good advice in the industry.
VanDerSchie: Yeah. And I know your team has created a simple intervention process to help move people closer to their goals and articulate their goals more clearly. Would you mind explaining what that looks like?
Murphy: Sure. And that was what we were talking about a little bit before this three-step process. And this is part of the research paper we did, and advisors can download this and use this in their own practice. Again, it's a three-step process where at step one, you're asking people just to start to brainstorm almost writing in pencil what their goals are; by step two, you're giving them a checklist and a structure that gives the client an opportunity to better articulate and think about what they're really motivated by; and step three then comes back and asks them what their goals are. And if people – well, first of all, if these checklists were worthless and not all that useful, you'd expect the answers on step one and step three to be identical to each other. And they're just not. We find that people are fundamentally changing what they answer in their top three answers about 75% of the time. And this is amazing, right? So, it's one of those questions you ask people, what are your goals? They'll give you an answer, but it may not be all that reliable.
VanDerSchie: So, Ryan, when in the process would you introduce this and how would the advisor use this with, say, a couple, for example?
Murphy: Oh, yeah, okay. So, when in the process – I would say this is pretty early on in the journey. This is part of discovery, and it's part of the advisor understanding that motivates the investor. It's probably not going to be the first meeting, but I would expect this within the first year or so of getting to understand what a household is trying to accomplish. Moreover, it's something that can be revisited, I would say every five years or so, because goals are not carved in stone. And as people mature and their lives change, they update their goals as well. And that makes a lot of sense. So, this is something that can be done maybe early on in the journey, but also maybe touching every three to five years or so.
You asked about you working with a couple on this, and that to me is fascinating. So, when talking to advisors about this, that's the idea. When you have a couple come in, you would have them do this separately. So, they go off – or you do this process with them one at a time and then come back and compare answers. And I've explained this before, an advisor sometimes push back a little bit, like, oh, no, this is going to be like marital counseling, which, well, my response is, you're going to be doing marital counseling anyway. This is just going to give you a heads up as to where the fights are going to be.
And I think that it's really worth trying to establish alignment and a harmonious understanding of what the goals are in a household before the advisor starts to put together an investment plan. Because if the members of the household as a couple have very different goals, then there is not going to be a single plan that satiates that. And so, making that clear, getting that on the table, having that discussion and hashing it out, I think is really valuable. And then when there's that alignment that's built up, then it becomes a lot easier, I think, to develop a good plan to meet the agreed upon goals.
VanDerSchie: So, Ryan, when an advisor is in that situation and there is an argument over priority and goal setting, how should the advisor handle that, especially in front of the couple?
Murphy: Well, I think it's an amazing opportunity. It's exceedingly valuable to start to bring that to light and to start to talk about these things. And just because there's a disagreement, doesn't mean that it's necessarily destructive. It can be like, oh, you wanted this. I didn't know that about you. Tell me more about this. And so, then couples start to better understand each other and what they're trying to accomplish. And that maybe what they thought was a disagreement is just a matter of timing. Oh, okay, that makes sense. Let's work on that first. And then we'll work on my thing second. And that works out really well.
So, I think that this is an opportunity for there be transparency and clarity about what people are motivated by and what they're trying to accomplish. And what an advisor can do in this point is I think ask lots of questions. And there's actually some amazingly good books that are written on negotiation. How people talk about and think about how there can be conflicts and it's not necessarily destructive. It can actually be quite valuable to address those conflicts and out of that find the shared value of the couple.
VanDerSchie: Okay, shifting gears a bit. One of the things that's interesting to me and maybe it's a parallel here is that Morningstar has hundreds of equity analysts covering different companies around the globe. And one of the biggest factors they're trying to emphasize is does this company have an economic moat – in effect, something that keeps competition away or makes it unique. And if you're an advisor thinking about building a moat around your business, is this approach – taking a goal-centric approach or a financial planning-centric approach, is that one way to do it? And Ryan, if you wanted to implement this process in your business, how would you get started?
Murphy: Right. So, I think this is a differentiator. What people are looking for in their advisors, someone who really understands them, really gets them and can help them make choices today, to get them where they want to go. And so, in terms of building an economic moat for an advisor practice, having the moat of really understanding your clients, I think, is exceedingly valuable. And that's the sort of strong foundation for a relationship and for being able to have that long-term trust that good advisors develop with their clients over decades.
You ask how an advisor could use such a thing like this? Well, we have lots of pieces that come out of our behavioral science group, and one of the things that we've endeavored to do on the tail ends of any of these pieces of research is have something that's actionable. Here's a takeaway that an advisor can use. This three-step checklist was one of those, but we have lots of other things that come out of our research that are things advisors can use as a process internal to their practice or things that they can do with their clients or things to generate engagement. All of that is predicated on the behavioral science work that we do, trying to better understand what motivates people and how we can help advisors leverage that to connect and work with their clients.
VanDerSchie: And just in terms of other advice for advisors, like how would you think about using goal setting as a way to potentially reengage clients who haven't been as responsive or an advisor hasn't met with over a medium-term period of time?
Murphy: Sure. I think of this very much as personalization and personalization is perceived as valuable. And so, as advisors can start to tailor plans for their clients that are based on an understanding of what really motivates the clients, that kind of personalization is valuable and the sort of thing that drives engagement.
VanDerSchie: Ryan, I want to come back to the couple example again, because I think many advisors can relate to this. It can be tricky because especially in cases where both are showing up for meetings, a lot of times, as you know, it's quite common for potentially one to be the alpha in the room and kind of take the lead. What can be done from your perspective as an advisor to ensure that both of those voices are ultimately reflected in the financial plan?
Murphy: I think that as we've gone through this work and looked at some of the interventions we've had, there's this kind of structure that comes out of the ways in which questions are asked or checklists are used. And this idea of being able to use them independently with members of the household. And so rather than just have a single meeting where you expect them to answer with one voice, you give them a chance to go off separately and do those things in isolation. And that I think can give people a chance to talk more about it, to think more about it. And maybe that's the sort of thing that then they take those insights, and they go off as a couple and discuss more of those things with themselves. And then when they come back, then they have a little bit more better, more unified understanding of where both are.
I think part of this a little bit too comes from a curse of knowledge, which is advisors are – and this is what they do every day. They're experts in thinking about financial goals and investment plans and all of these other sorts of things. And so, it's remembering that for investors, this might be something that they only contemplate seriously once a year and in the context of the advisor's office. And so, things that can be done to give clients a little bit more time and space and structure to think through these things can help them come up with deeper answers, answers that are more reflective of what their motivations are and not just the sort of thing that sounds good or is off the top of their head.
VanDerSchie: That's helpful. Thank you, Ryan. So, as we look to wrap up, I want to remind our listeners that back in April, amidst all the volatility, we created a presentation deck for advisors and at the very last slide of that deck, it went through what we believe to be 10 of the best investing quotes of all time. It included greats like Warren Buffett and Munger and Peter Lynch. And I mentioned earlier in the podcast the quote from Howard Marks. And he was also on that slide with his quote, you can't predict but you can prepare. But point being, they all seem to have one thing in common. They were all about behavior, not stock picking, not asset allocation. Ryan, why do you think behavior stands out above everything else?
Murphy: Well, I mean, you're asking behavioral scientists why behavior is so important. But I mean, I think our industry is very much about investments and investors. And we've made huge strides in economics and quantitative finance and technology. All that helps us better understand and manage investments. And that's been really great. But investors are not so easily understood, nor so easily managed. And it's not rocket science when it comes to understanding people's behavior, it turns out it's more complex.
And so, then we're left with questions of how to think about how to nudge sometimes irrational decision-makers to make more rational decisions. And these are enduring challenges. But luckily, there's a whole body of research coming out of psychology and behavioral economics that's finding that these irrationals are in some ways predictable. And as long as they're predictable, then we can start to think about ways to anticipate them and ways to intervene that can help irrational decision-makers make better choices. That allows us to build structure. And that can be used to help nudge people in the moment to help them make better choices.
And advisors are a key part of helping make that happen. And it's part of what I love about my job. I'm very much a scientist at heart. And I get to try and take these ideas and then have them be used and have impact. And that's why we've made such an effort in the last year is to make sure that our papers, the research papers we have also have a component at the end, something that's useful and possible for advisors to leverage in their own practice with their clients.
VanDerSchie: All right. We've covered a lot. And so, to wrap up, Ryan, in 30 seconds or less, I'd love to hear your take on the big payoff for the investor. When goals are clear and aligned with the investment strategy, what's the benefit?
Murphy: Yeah, I think that it's worth remembering how difficult it is to be an investor. It requires people to be patient, to take resources they have today and not spend them now to put those aside. And it also requires people to embrace the uncertainty of the markets, which just doesn't go away. And our brains aren't really wired well to do either of these things. We're not wired to be patient, or we're not wired to love uncertainty.
So why would anyone do this to themselves? Well, I think the answer is goals. People have bigger, better things they want to accomplish from where they are now and where they want to get to. And I think that if we can recast investment, this entire process of investing in terms of a goal-seeking process, it really helps line up people's behaviors better to the kinds of things they need to do today to get where they want to go. And so, there's this goal-centric, this foundational notion that that's why people are investing in the first place. And the more that we can get people thinking in those terms and lined up without language, a lot more positive behaviors come out about it.
VanDerSchie: And Ryan, for those who want to learn more about Morningstar's behavioral research and how it can be implemented and benefit their practice, what's the call to action here? How do they learn more?
Murphy: I think the best point of contact would be Morningstar's regional sales directors and wealth sales. We have a multitude of different papers, a lot of different research in this area, and those folks are well acquainted with it and can make sure advisors have access to it.
VanDerSchie: And there you have it, another episode of Simple But Not Easy. As always, thank our guests for their time and engagement. And once again, if you'd like to know more about how Morningstar can support you, please drop us a note at simple@morningstar.com or me directly at Nicholas.VanDerSchie@Morningstar.com. That wraps up this week's episode. Before we depart, if you enjoy hearing the insights on our podcast, please consider leaving us a 5-Star review on Apple Podcasts or Spotify. Until next time, thanks for listening.
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