Most people have heard of Walter Cronkite. In the 1960s and 1970s, he was one of the most recognized television journalists and was known as “the most trusted man in America” because of his dispassionate style, steady temperament and lack of personal opinion when reporting. If Cronkite were talking about the coronavirus pandemic, he would maintain his commitment to the facts—and only the facts. But today’s news is filled with extreme language, and some opinion-based commentaries disguise themselves as news programs to improve their credibility and attract viewers. Let’s look at how that affects clients.
A Shocking Lack of Confidence
In 2019, Gallup asked Americans about their confidence in various institutions and found that television news was trusted “a great deal” by only 8% of those surveyed. The only institutions that were less trusted were the US Congress. Something profound has happened in the almost 40 years since Walter Cronkite signed off by saying, “And that’s the way it is!”
Despite the fact that television remains one of the most influential distributors of information and ideas, the majority of Americans distrust the reports they get from TV. Importantly, because television influences how we think about the world, it’s critical to understand why TV and many other sources of information are no longer trustworthy.
When More Means Less
In the early days of television, most homes had one small TV set connected to an antenna poking up from the roof. There were three major networks, and audiences were fascinated by the nightly news being read by someone they could see. Advertisers fought to sponsor the programming. The economic model was strong, and the men (always) who anchored the news were trained and disciplined journalists, invested in preserving their credibility and trustworthiness.
As time passed, a few channels evolved into hundreds, and the explosive expansion of media changed the fundamental relationship between consumers and providers. In the early days of TV, consumers had few choices. By the 1980s, the choices were numerous. Today, the options seem infinite. The result: every media provider is competing for viewers, which translates into a shrinking number of dollars of revenue. Providers must cause viewers to watch their shows and work hard to keep audiences engaged.
The Psychology of Engagement
What television and other media sources do to keep the attention of their viewers is important for client-facing financial advisors to understand.
Everyone is familiar with the phrase “pay attention,” but few know that this is a literal description of how the human brain processes information. The brain is a survival tool, and every human has a budget of mental energy dedicated to making sense of the world and ensuring one’s survival. At every moment, people pay from that budget to process what they see, hear and feel. The brain is constantly scanning for threats and opportunities; when it discovers either, it focuses intensively to ensure survival and prosperity.
Three decades of research in behavioral finance has revealed that the brain pays more attention to threats than to opportunities. This makes sense: a threat can be deadly, while even a huge opportunity is unlikely to permanently change the quality of life.
This built-in vulnerability is exploited by some media to engage and captivate viewers. By delivering a constant stream of negative or threatening information through a reporter who appears concerned or alarmed, a television program can activate vigilance in a viewer who will instinctively budget more mental energy to pay attention to the message. To hold the viewer’s attention, the program continues to present negative information and concern so that the viewer becomes more anxious, threatened and watchful. With more viewers, a program can demand more advertising revenue.
What Can a Thoughtful Advisor Do?
Clients may not be aware that their favorite news channel is delivering a steady stream of emotionally distressing information to create vigilance that ultimately benefits its own bottom line. The coronavirus is a perfect situation to enable the media to use the built-in vulnerability of viewers.
There are good reasons for clients to be concerned and to take appropriate actions to protect themselves and those they love. But every advisor knows that a distressed and emotional client is more likely to make impulsive decisions. Overstimulated, troubled, mentally exhausted investors are unlikely to make good investment decisions or follow the advice of their financial advisor.
To help clients preserve a rational point of view about big negative events, we recommend the following three steps.
First, become a savvy consumer of media. Notice how stories and reporting impact your emotions: facts tend to stimulate curiosity, while negative information, vocal tones and facial expressions stimulate vigilance and feelings of threat. A good way to tell the difference between journalism and manipulation is by realizing how a program makes you feel: the more you feel anything, the less likely it is that you’re consuming reliable, fact-based information.
Second, remind your clients to be aware of the nature of today’s media. While we need to be well informed about the pandemic and how to stay safe, it isn’t helpful to become upset or overwhelmed by what we are seeing on TV. Invite clients to become savvy media consumers and maybe even a bit skeptical about more sensational reporting.
Third, assume clients will become activated by what they see and hear on television, and be prepared to intervene. The fight-or-flight instinct will be triggered, and investors will be driven to make impulsive decisions.
Once you’re well informed, you can calmly offer your professional point of view and help clients make sense of the world. Understanding how your clients react to the real threat of the coronavirus and the media’s sensationalism is part of your role as their advisor. Your voice of reason can effectively counter the messaging designed to stir up vigilance. The benefits of that role will continue to accrue in your relationships long after the situation returns to normal.
The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of all AB portfolio-management teams, and are subject to revision over time.