You probably think you can spot a liar. In fact, as an advisor, you may think its one of your professional attributes.
No one, after all, wants to get stuck working with a Madoff-like money manager, an analyst fudging facts about a stock -- or especially a client whos not as forthcoming as he ought to be.
Unfortunately, the odds are you in fact cant tell who is lying to you. Nor can the so-called experts.
And forget about such "giveaways" as someone who wont look you in the eye, appears nervous, fidgets or contradicts herself. There is no relationship whatsoever between those behaviors and not telling the truth, Maria Hartwig, associate professor of psychology at the John Jay College of Criminal Justice in New York said at a CFA Institute research presentation on Thursday. Zero, she repeated.
A meta-analysis of research conducted over 50 years on judging deception showed that the odds of accurately detecting lies are only marginally higher than pure luck, Hartwig said at a presentation on the psychology of deception, based on research conducted with the CFA Institute.
Whats more, she said, not a single study has found that presumed experts outperformed lay people in accurately detecting lies -- although these self-defined experts are more likely to think all statements are lies.
HELP FOR ADVISORS
The good news is that the CFA Institute is working with Hartwig on a methodology to help financial professionals improve their ability to detect deception said Jason Voss, content director for the Institute and co-author of the study on lie detection beliefs.
While there is no magic bullet to detect deception, the key is to ask better questions, Voss said, and to think of dealing with suspected liars as if it were a chess match requiring more strategic thinking and anticipating an opponents next moves.
Whether the suspected deceivers are fellow professionals or clients, financial advisors are likely to have an ongoing relationship with them, he noted. As a result, the advisors need to ask smart, systematic questions that draw on previous knowledge in such a way that will reveal false statements, he said.
Indeed, Hartwig added, one of the best ways to detect deception is having prior knowledge of a situation -- and using that information to skillfully draw the truth out of suspected liars.
Another technique, she said, is to ask suspected liars, who often carefully rehearse the way they will counter challenges to their veracity, questions which they are unlikely to have anticipated.
The bad news is that the above suggestions are much easier said than done and that researching how to do detect deception more effectively has just begun.
More research needs to be done, Voss said. It will take several years to get right.
PINOCCHIO MYTHS
So what about those infamous tells, like nervous tics, tensing up, shifting body position and averting eye contact? All Pinocchio myths, Hartwig said.
Yes, people who lie do all those things, she said -- but so do people who dont, especially if theyre in a stressful situation. And liars know theyre being scrutinized, so they make more of an effort not to do things that might give the game away.
Indeed, were all somewhat socialized to not reveal everything we know or are thinking, Hartwig said. Children who complain after receiving a present that's not to their liking will almost surely be reprimanded, for example. And society wouldnt function very smoothly if people expressed their actual feelings all the time -- indeed, she said, those who consistently do are usually classified as having a behavioral disorder.
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