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Financial Planning > Behavioral Finance

3 Obstacles Standing in the Way of Your Client’s Success

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To be human is to know that we are prone to certain feelings, emotions and responses. Unfortunately, these emotions can sometimes drive us to behave in ways that may be counter to our own well-being. As advisors we can help our clients avoid self-sabotage by acknowledging the 3 biggest blunders our clients make and sharing ways to safely navigate through these waters to a calm and logical conclusion. 

Obstacle #1: Avoidance.

Many people are scared senseless when their financial statements arrive. Rather than deal with any of the “bad news,” many folks refuse to even open the envelope. Refusal to deal with any financial news is simply unacceptable and we cannot allow clients to dodge their financial reality. Your clients can’t change what they refuse to acknowledge. We can help them face the reality together and ensure them we will help them drum up a game plan to deal with any challenge that presents itself.  Be their ally, their confidant and their advocate, not an enabler to their avoidance issues.

Obstacle #2: Stubbornness.

Many folks we sit down with are just plain stubborn. They may recognize that they are going down a bad financial path — whether it’s their debt level or past investments they have made — and yet they refuse to change. It is challenging for many of us to admit failure. Even more challenging for some is embracing change. However, we must still challenge that client with change if change is in their best interest. Let them know it’s not too late to change direction and that you work with many clients who were in the exact same position, who realized it wasn’t too late to make some changes. Sometimes you need to be forceful when trying to awaken your clients to change. Other times it pays to be more delicate (perhaps try to find a way to make it seem like it was their idea). This is especially important with clients with egos who feel they always need to be “right.”

Obstacle #3: Overwhelming emotions.

When it comes to money, there are two things that motivate people to action: fear and greed. When our clients have fear, the physical reality is that they shut down and are paralyzed. The opposite is true when your client is motivated by greed. They may feel an inexplicable desire to dive head on into risk, when perhaps their tolerance is limited in this pool.  Both fear and greed evoke a literal physical response from your client, and either emotion can be toxic to their financial health. Their hearts and minds might race, they may start to sweat, and their body may tense due to the flood of adrenaline. Where we can help our clients is to ask them to recognize their emotional state and ask that they take a deep breath and step back until the physical indicators have subsided and they are in a more logical state of mind. After this self-imposed “timeout,” their likelihood of making a good decision will greatly increase — be it financial or otherwise!

Aristotle called man the rational animal. Obviously, he was never a financial advisor. If he had been, he would have realized that clients get very emotional about their money and their financial decisions. It is your job to be the detached advisor guiding your clients back to the path of logic. It’s not easy, but keeping these three pitfalls in mind will help you recognize when a client is losing their way. 


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