A client walks into her advisor’s waiting room and talks to the receptionist, who gets her a cup of coffee. Then she walks over to the couch, picks up People magazine and sits down. There’s a TV in the corner tuned to CNBC, and while she isn’t really watching it, loud, frenzied activity on the screen gets her attention. Good news—the Dow is up 300 points this morning and still climbing. Her stress level skyrockets.
Clients get stressed by things you wouldn’t predict. This is a classic example, uncovered at the Kansas State University (KSU) Financial Planning Research Center by Dr. Sonya Britt of KSU and Dr. John Grable, now at the University of Georgia, in their recent paper “Financial News and Client Stress.” They found that contrary to what you might think, client stress goes up when watching financial news, and hearing that the market went up causes stress levels to rise even higher. “Specifically, 67% of people watching four minutes of CNBC, Bloomberg, Fox Business News and CNN showed increased stress, while 75% of those who watched a positive-only news video exhibited an increase in stress,” they wrote.
Why? “Financial news was found to increase stress levels, particularly among men,” wrote Grable and Britt. Surprisingly, positive financial news, like reports of bullishness in the stock market, created the highest levels of stress, they found, suggesting that positive financial news may trigger regret among some people. The authors referred to previous studies of regret that found “people tend to feel most remorseful when they look back at a situation and realize that they failed to take action.” The authors’ conclusion: Financial advisors should think twice about having office TVs tuned to financial channels.
Most advisors know that good client relationships are based on trust. What many fail to realize is that high client stress levels can have a negative impact on the ability to trust—particularly if that stress is created or exacerbated during client visits to an advisor’s office. To get a better handle on the factors that affect client stress and what advisors can do about it, my consulting company, Angie Herbers Inc., sponsored research at the KSU Financial Planning Research Center, a center created to conduct clinical research on factors that affect advisors and clients in the advisory industry. The research was conducted by Grable and Britt in a series of tests with real clients and real advisors (with both wired to gauge their physiological stress levels), which was reported in their 2012 research paper, “Stress and the Office Environment: How Financial Advisors Can Help Manage Client Anxiety and Improve Client-Advisor Relationships.” As with their study of the effects of financial news, their findings will surprise many advisors—and help them have better relationships with their clients.
The relationship between high levels of stress and poor decision-making is well-known to psychologists, researchers and sports fans around the world. “Our brains operate on different levels, depending on circumstances,” Britt told me in an interview. “Under high levels of stress, our intellectual decision-making functions shut down, and our emotional flight or fight response kicks in.” Added Grable: “People will adapt to low levels of stress differently, but overwhelming stress results in predictable behavior. When we are stressed, our brains cannot move to make intellectual decisions.”
Included in those intellectual decisions is the ability to make sound financial judgments and whether to trust one’s financial advisor. “It is important to note,” Grable and Britt wrote in their report, “that developing client trust can sometimes present challenges that even the best communicators and counselors cannot easily overcome.” Stress could be the “missing factor” in the broader client relationship, to the point that clients may engage an advisor during a period of high stress or find that their stress level increases due to pressures like financial news reports or worrying about their financial situation. “When this occurs, planners who focus primarily on technical issues or communication techniques may not make a deep personal connection with clients because stress acts as a defensive barrier to open dialogue,” they wrote. The researchers’ conclusion: It is essential for financial planners who are interested in developing deep, emotionally stable relationships with clients to understand the role stress plays in shaping the context of client meetings.
In their 2012 paper, Grable and Britt documented how clients experiencing stress often act in ways that short-circuit their own financial well-being. For instance, stressed clients often make short-sighted decisions; they may become defensive when answering certain questions; answers to questions may become shortened and not descriptive; and when very stressed, clients may be reluctant to implement financial planning recommendations. “Regardless of how well a financial planner uses communication techniques,” they wrote, “unless the stress exhibited by a client is identified and reduced, the likelihood of developing a trust-based client-planner relationship will be significantly threatened.”
Meeting with Advisors Causes Client Stress
In addition to the negative effects that financial news can have on clients, Grable and Britt also found that meeting with advisors can increase client stress levels dramatically, both before and during the meeting. Consider Figure 1, which shows that during a meeting with their advisor, 54% of clients showed increased stress, while 8% remained at constant stress levels. Just 38%, or slightly more than one out of three, experienced a decrease in their stress levels. Rather than seeing that drop in stress as a positive outcome resulting from the advisor making the client feel less stressed, the authors observed those clients to be bored or tuned out, which are also reactions to higher stress levels and don’t often contribute to better decision-making.
“Generally, financial advisors unknowingly increase the stress level of their clients during advisor-client meetings,” wrote Grable and Britt. “What seems like a common question to an advisor may be perceived as a personal invasion of privacy when evaluated by a client. In these situations, as stress increases, the ‘fight or flight’ mode of thinking overrides higher-order cognitive processing. In some situations, clients may be focused on avoidance or socially acceptable answers rather than on providing directed and thoughtful responses to inquiries.”
By way of example, the authors consider the answers associated with a typical risk-tolerance assessment. “Asking clients to judge their willingness to take financial risks can be quite stressful for clients,” they said in our interview. “This is particularly true for men. Men almost always over-report their tolerance for risk, especially when asked by a female financial advisor. This is a ‘fight’ response that occurs in the hindbrain. By and large, men do not want to appear weak or scared. Some men and many women will overestimate their risk tolerance while others may underestimate their true level of risk aversion simply to avoid further questioning—a ‘flight’ response to the stressor.”
In addition to risk tolerance questions, Grable and Britt found certain questions used in prospective meetings that are harmful. Here are some questions often asked in prospective client meetings that typically increase a client’s stress level:
- How satisfied are you with your overall current financial situation?
- How stressed do you feel about your personal financial situation?
- How would you rate your financial knowledge level compared to your peers?
- What is your primary financial goal?
- What are three areas that you would like to improve upon in regards to your personal financial situation?
Of course, many financial advisors feel that asking questions like these are essential to creating and implementing a sound and appropriate financial strategy. Yet some techniques might work better than others to get the necessary answers without creating unnecessary client stress. I have found in my own consulting work with advisory firms that the most successful firms at closing and retaining clients conduct what I call a “client-directed meeting.” I recommend that in all client meetings, including those with prospective clients, the advisors bring nothing: no questions, no agenda, no marketing materials. They simply ask the client, “Why are you here?” Some might think this will lead to chaos, but it doesn’t: It’s a specific process of client engagement and trust that puts the client in control of the meeting and, we find, greatly decreases their stress levels and increases their connection with their advisor, thus significantly increasing the close ratio in prospective meetings. “The key,” said Britt, “is simply to give the client the perception that they control the meeting.”
The Office Effect
In their research, Grable and Britt also discovered that the office setting can play a major role in increasing or decreasing client stress. Figure 2 shows client stress levels during initial client interviews consisting of 15 questions. The dotted line represents the stress levels of clients sitting across a table or desk, such as in a conference room setting, from the advisor. The solid line shows the much lower stress levels of clients in a living room setting: sitting on a couch with the advisor in an adjacent armchair.