Journal of Financial Planning: June 2017
Margaret (Peggy) Doviak, Ph.D., CFP®, is founder of D.M. Wealth Management Inc., a financial planning and portfolio management firm in Norman, Oklahoma. She is an associate graduate professor for the College for Financial Planning, a co-host of the FPA Theory in Practice Knowledge Circle, and author of 52 Things a Broker May Not Tell You.
In our current climate of instant access to data from around the world, the exploding popularity and transience of social media, and an ever-pounding background accusation of “fake news,” knowing who to believe is difficult. When you layer on top of that marketing firms that tell advisers they need to be creating content, at least half a dozen websites that encourage advisers to answer questions in a public forum, and wholesalers who create advertorials, determining whether or not research is legitimate can also be difficult.
Our profession is making great strides in helping financial planners read and understand research. However, today I would like to take a step back and ask a more basic question: how do we recognize research that is valid?
I believe that finding the answer to this question can be tricky in our current environment, but it’s possible. To determine if an article is really research, financial planners need to answer the six questions of investigative journalism: Who? What? When? Where? Why? How?
Who?
If we have been practitioners for a while, we recognize some names in our profession. However, for new planners, that name recognition may not yet exist. Additionally, emerging thought leaders may not be as well known.
A good place to begin learning about someone is on LinkedIn. A general Google search may also indicate the scope of the person’s work. Additionally, when you are evaluating the author of research, look at their designations. It is possible that he or she may not be a CFP® practitioner but may have other valuable credentials, like a Ph.D. in economics. If you don’t recognize an author’s credentials, research to see what was really involved in earning them. Finally, what are their professional affiliations? Are they members of groups that encourage unbiased research like FPA?
What?
The next question to answer is, what is the purpose of the research? Once you have learned how to read research, does this research seem to address a valid concern? Research can be theoretical or practical, and just because you may not understand all of it doesn’t make it invalid. However, some articles masquerade as research when they are simply trying to sell you something. I have read these advertorials, and they are often more designed to impress than they are to explain, and I can finish the article more confused than when I started it.
Research is not just opinions, commentary, or summary. Research is action grounded in theory. Research involves looking into a problem or a situation taking a particular perspective, called a theory base, to try to expand the knowledge around the issue. Original research is lengthy and although it could be found in a blog or another more casual online format, that is not common.
Research is published in books, as articles in reputable journals, in self-created white papers, or in other formalized formats. Research always has references, and these references are substantive and from published sources. If a research article doesn’t have references (sometimes called a bibliography), be cautious.
When?
When was the research published? We have seminal research in the field of finance that is ageless, but some research does not age as well. If the article provides return, risk, or correlation statistics, what was the time horizon? Additionally, does all of the data in the article cover the same time period? It is possible to cherry pick market data in a way that favors the outcome? If the author has chosen to use different periods of time when discussing different characteristics, you should look for the reason.
Where?
Even though most research is conducted in higher education settings, the FPA Theory in Practice Knowledge Circle brings together academics and practitioners who support financial planning research. Not everyone who is a researcher is at a university. Instead, research can be conducted by financial planning practitioners. Major financial companies or nonfinancial corporations may publish research that is well written and without bias. Sometimes commercially produced advertising articles masquerade as research to create an impression of prestige. Determine the source of where a study was conducted, and you may be able to judge its intent more easily.
Why?
Although research can be written to persuade in addition to inform, the persuasion in real research is quite different from what you will see in marketing campaigns. Research deals with theory put into practice or applied to a situation; it does not promote products. For example, a research study might indicate that index funds outperform actively managed funds, or it might come to the opposite conclusion. A research paper will not take it to the next step and recommend a fund to purchase—that’s marketing. Sometimes, marketing uses research as its basis for encouraging you to make a certain decision. That can be a very good strategy, but it is up to the practitioner to do some checking about the study that is being cited.
How?
Research methodology can be complicated, but it is important for a reader of research to look at the basic framework. Research is typically numerical or descriptive, and the type of research being conducted will impact the scope of the study.
Numerical research, or quantitative research, often involves surveys and statistical analysis. Descriptive research, or qualitative research, looks at behaviors and practices of groups or individuals. Usually, there are more participants in a numerical study than a descriptive study. A descriptive research article can be written about the activities of one participant and still be valid research; however, it may be difficult to apply in other settings. Broader numbers of participants can result in findings that are easier to apply, but it’s very important that the researcher acknowledge the limitations of the research methodology. And closely related to this, reputable research avoids language like “always” and “never.”
In Conclusion
As consumers of financial articles, planners need to be able to differentiate research from opinions, informational articles, and marketing pieces. Asking the journalistic questions of who, what, when, where, why, and how may make it easier to recognize whether the article in question is research that is helping advance the profession of financial planning.
Learn More
The FPA Theory in Practice Knowledge Circle conducts monthly phone meetings every third Monday from 2 to 3 p.m., Eastern. Mark your calendars to participate in this groundbreaking forum that is advancing the profession by building bridges between the academic world and financial planning practitioners. Visit Connect.OneFPA.org.