Perception Is Reality

I think it would be fair to say that in todays interest rate environment it can be tough to see the proverbial forest through the trees. We spend our days bogged down in the nitty gritty, and it can be tough to pull yourself up above the fray and see the light sometimes. As we spend our days trying to convince our clients of what is right, what is wrong, and who has their best interest at heart, it can become a long battle just to survive sometimes.

Over my career in mortgages, finance, and all things money related, nothing has shocked and confused me more than some of the things clients have said to me. Things like ” I am scared that we go into a recession, so I want a fixed rate mortgage”. Now, we all know – or damn well better know by now, that if the economy goes into a recession that means that the Prime Rate should drop, thereby reducing mortgage payments. If the client was truly scared of going into a recession, then a variable rate mortgage would actually be the best thing. Bad times generally equal lower interest rates. Conversely, at the bottom of the cycle when Prime Rate has dropped and bottomed out, people seem to want to pile into variables – at the wrong time. However, perception and reality are often disconnected, and nowhere more so than personal finance.

How many times have clients called you asking if their fixed rate will drop 25 bps on Sept 4th? We could probably fill a blog chock full of these types of things clients have said, but the bigger question is ” why”? Why do clients think that their fixed rate could drop by 25 bps on Sept 4th? Is it because they see relators dancing away on Tik Tok saying that ” rates are dropping” and there is no differentiation? Is it because the public education system has failed us all? Hard to tell, but the end result no matter the root cause is that there is a perception that rates are linked together.

I had had some very intelligent people say some pretty dumb things over the years. I am sure you have as well. People who, in their own field of expertise are held in high regard, and automatically assume that the intelligence spills over into other areas like personal finance. I find that the more educated and intelligent people are outside of finance – the less likely they are to understand their own personal financial situation and the levers and switches than can effect change. Now of course that is a very broad over generalization, but that doesn’t mean it is wrong. Cue all the ‘ smart ‘ people now who will fill my inbox with word salad emails telling me why I am wrong.

But, if very intelligent people, and a lot of our clients can misunderstand something as basic as fixed vs. variable rate changes, what else can they not understand, misinterpret, etc.? I have always used the saying that ” perception is reality, and whoever receives it perceives it”. Sounds nerdy, but if you really step back and look at it, it will help you deal with clients a lot better. How people perceive things will ultimately determine their reality of it. No where is that more true than politics. I will use this example time and time again, because it is so false it should be a crime. The current governing party in Canada has continued to tell the population that Canada is leading the way in the G7 because they were the first country to cut interest rates, and that proves that their economic plan is working. That should be a criminal offense to lie to people like that. What they are pounding into the voting public is nothing short of a lie. Time and time again we hear how lowering interest rates is a sign of economic good fortune. We all know that is exactly the opposite of what reality is – but it doesn’t matter, because the perception is that interest rates going down is a good thing. Perception is reality.

It is also important to see the ” whoever receives it perceives it ” part. Now, Canada, I hate to tell you is a very indebted nation. Canadians hold a lot of debt. I mean a lot of debt. In fact, you could say that Canada is number 1. The US used to be number 1, but 2008 knocked the wind out of those sails, and left a lot of scars on the general public. So, if the vast majority of the voting public has debt and pays interest on that debt, then a message like ” interest rates going down is good” could be perceived very well by a vast majority. Who is receiving the message is just as important as the message itself. If I spent a lot of time, and a lot of money to launch a campaign that said gingers were the brightest people in the world, it wouldn’t really matter, since gingers make up 1% to 2% of the population. Even if I convinced every ginger on the planet they were the smartest, I only had influence on 1% to 2% of the population. 1% or 2% of the population won’t get me anything. However, if I could somehow convince 65% to 70% of the population of something – say something like, declining interest rates are a sign of prosperity, well then I would have a chance at making headway. Of course those 65% to 70% of people I am trying to convince are also the same ones that hold the debt. So, they are the ones I need to make believe that they are winning and my plan is working.

But, my real question to you as a mortgage agent, and the takeaway I hope you get from it is to ask yourself more questions. What do your clients perceive your value to be? What is the perception you try to push vs. the reality that your client sees? You may think you are amazing, intelligent and bright, but does your client feel the same way? You may think a blog you write is incredible, but if the people that read it see a different reality, is it a good blog?

Today’s environment is challenging for anyone to navigate, and the agents and brokers that succeed are the ones who’s perception of their value matches up and aligns with their clients reality. You may think you are adding value to your client, but the reality may be completely different for the person sitting in front of you. Every client’s perception of reality is slightly different, and if you want to be successful, you will need to figure out how they perceive the world. What is their perception of rates? What is their real world reality in real estate? A client who has only made money on real estate will have a much different reality of real estate than someone who bought in Jan 2022 on a variable rate mortgage. Understanding that their perceptions and reality of the world will be different will help guide your conversation and ultimately the decisions and choices that client will make as they go through the journey with you.

If you figure out someone’s perceptions of reality, and perception of finance you will help them accomplish their goal, and be rewarded yourself along the way. If you cannot figure out the difference between perception and reality, the reality is that you won’t last long in this business.