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Financial Planning > Behavioral Finance

Stress Fracture: How to Save Your Relationship With Your Client

By Angie Herbers

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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.

Notice that only in the final, more difficult questions do the lines converge. This results from lower stress levels felt by advisors as they sat across the table, which is also an important factor (more on that later). Still, at no time did the study find clients sitting at a table to have lower stress than clients sitting on a couch.

The authors concluded that clients reached their peak stress level when asked about a financial goal they had set in the last year and whether they had achieved it. However,  regardless of their income, gender or wealth profile, clients who met with their advisor in a casual setting with a couch and armchair started out with less stress than those who met in a traditional setting with the advisor facing the client over a table. Furthermore, over the course of a standardized interview, clients in the couch and armchair room maintained lower stress levels than those in the traditional room.

What should advisors do about this? “We recommend that every financial advisor configure at least one meeting room in their office with a couch and armchair,” wrote Grable and Britt. “Meeting with prospective clients in this type of room will generally reduce client stress, especially during fact-finding meetings. One of the most important keys to being relaxed is to be involved in a trusting relationship. To help keep stress low and start building a trusting working relationship with clients, it is important to tear down barriers.” The authors contend that using a setting with a couch and armchair does just that by eliminating the desk or table, which is a common physical barrier between clients and their advisor.

Advisors Transfer Stress to Their Clients

As mentioned above, and as one might expect, advisor stress can also contribute to client stress. In fact, Grable and Britt found that advisors who are experiencing significant stress levels transfer that tension to their clients, regardless of the office environment or the level of advisor preparation. Figure 3 shows the effects of advisor stress on clients during a typical client meeting. Notice that in all three cases, client stress increases throughout the duration of the meeting, with the solid line representing the average increase in client stress. The dotted line shows clients’ stress levels when the advisor’s stress levels were above average, while the dashed line shows the much lower client stress levels when the advisor himself or herself had lower than average stress.

“While ideally financial advisors should display low stress personas, this, in practice, rarely occurs,” wrote Grable and Britt. “Even so, it is possible to obtain reference point levels of stress exhibited by an advisor. Basically, clients are able to perceive their advisor’s stress even when the advisor takes steps to conceal tension-generating emotions. When advisors are stressed, clients experience a heightened stress level.”

As I mentioned earlier, advisors with an agenda or who want to effect some particular action from their clients often create considerable stress in those clients. As the Kansas State research shows, that may result in large part from the tension that such an agenda creates in the advisor. Conversely, advisors who are more focused on simply helping implement the client’s agenda, whatever it might be, likely will feel less stress and therefore transfer less tension to their clients. Of course, advisors can also manage their own stress levels by becoming more comfortable with the advice they are offering, more confident that it is truly in the client’s best interest and more comfortable that the fee they are charging is both fair and competitive.

Stress Created by an Advisor’s Meeting Schedule

Grable and Britt’s research also found that advisors can manage their stress levels by recognizing the stress pattern created by multiple client meetings in the same day and using that pattern to their advantage. Figure 4 shows the changing stress levels as advisors hold six client meetings over the course of a single day. (Six meetings might seem a bit like overkill to some advisors. However, we find that as a firm grows, senior advisors spend the vast majority of their time in meetings daily.) Notice that a typical advisor’s stress level starts out relatively high and decreases in each subsequent meeting until the last couple of meetings of the day. According to Grable, standard human performance stress research suggests that this isn’t an unusual pattern. “In the first meeting of the day, people are often not quite focused on the task at hand,” he told me. “Then, toward the end of the day, we’re typically distracted and losing interest. Most of us are just not at our best early and late.” Added Britt: “Any transition from one task to the next is stressful. As we repeat the same task—in this case, client meetings—over and over, our comfort level increases. Then, toward the end of the day, our focus starts to wander again: thinking about what we still need to do before we go home or what we’re going to do after we leave the office.”

Regarding office meetings, the paper concluded that advisors should schedule their most important client meeting during the middle part of the day. Their stress is highest during the first meeting and the last meetings of the day, and they are likely adding to their clients’ stress during those meetings. “Given the myopic response bias associated with elevated stress levels, prospective client meetings during this time may not result in client or advisor satisfaction,” the authors wrote. “What is probably happening is stress transference to clients who meet with an advisor late in the day. As the advisor’s stress increases, that stress is transferred to the client. As the client’s stress increases, his or her willingness to engage the services of the advisor is likely to decrease.”

Based on this research, one might be tempted to simply stop scheduling early and late client meetings. Unfortunately, that would be like starting your next round of golf on the third hole because you never play the first couple of holes well. Grable and Britt found the same pattern of high stress declining and then increasing again at the end of the day whether advisors did four meetings or eight meetings in the same day. As it turns out, the midday meetings are low stress because you’ve had a few meetings to “warm up” and whenever the last meetings are, you’ll be thinking about what you’re going to do next. “Since the middle meetings are those with lower advisor stress,” observed Britt, “doing more client meetings in the same day resulted in more meetings in the middle of the day, when advisor stress levels were lowest. Advisors might also consider scheduling their more important meetings in the middle of the day, when they are warmed up and most comfortable, but haven’t started thinking about going home yet.”

While a lot more research into the effects of stress on clients and advisors clearly needs to be done, the work of Grable and Britt has provided some valuable insights into the factors that increase client stress and what advisors can to do to help their clients feel more comfortable—and consequently, to help them make better financial decisions. Simply recognizing client stress levels is a big first step, as is consciously conducting client meetings with an eye toward reducing both client stress and the stress level of the advisor.

A financial advisor’s office environment has an impact in shaping a client’s level of stress, as well. “Advisors who think strategically about how and where they meet clients will experience better results than advisors who unthinkingly maintain the standard operating procedure,” concluded Grable and Britt. “Results further indicate that how an advisor structures his or her day can play a role in transmitting stress to clients. With this information it may be possible for financial advisors to arrange their office environments and practice procedures in such a way that they are able to manage, in part, the stress level of their clients, and as a result, increase the odds that a prospective or current client will make better decisions.”

Remember: negative news isn’t really “negative.” If you have to run financial news in the office, try to run negative news.

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