As a financial advisor, money, undeniably, is your world. But in the broader culture, talking about money from a personal perspective remains a big taboo.
People feel shame about money: if they don’t have much, they’re afraid they’ll be judged a loser. If they have a lot, they fear others will try to take financial advantage of them.
Most parents would rather talk to their kids about sex than about money. Sigmund Freud proclaimed that, concerning the psyche, the strongest symbolic connection is between gold and feces — in other words, money is “dirty.”
What’s the No.1 stressor in the lives of three out of four U.S. adults? Money. That’s what annual American Psychological Association surveys find year after year.
To be sure, money is a deeply emotionally charged subject. Is it any wonder, then, that most people suffer from fear and anxiety about talking to a financial advisor?
Indeed, 71% of Americans find some aspect of speaking with an FA to be scary, according to a survey last year of more than 2,000 adults by Harris Poll on behalf of McAdam, an independent financial planning firm. The top concern — 49% of respondents — was that talking to an FA would “end up costing me a lot of money.”
Other worries: nearly half the respondents said they were chary of trusting an advisor with their personal information. And 41% were afraid that an FA would be unable to help them with their finances.
With financial advisor-phobia a hard fact of life, the ways in which FAs deal with this challenge can make the difference between acquiring and retaining clients or losing them to competitors who do a better job of allaying folks’ fears.
“Money is a big issue in our culture — but we get so many messages that we shouldn’t talk about money that when we go into a financial planner’s office, it’s just natural to feel anxious about having that conversation,” says Brad Klontz, a financial psychologist and associate professor at Creighton University, as well as managing principal of Occidental Asset Management, near San Francisco.
One in four people feel “moderate” to “severe” anxiety about engaging with a financial advisor, 2014 research conducted by the National Seniors Productive Ageing Centre, in Melbourne, Australia, found. Here in the U.S., incidence rates likely would be similar, the study’s co-author Douglas Hershey, psychology professor and director of the Retirement Planning Research Laboratory at Oklahoma State University, reportedly said.
Certainly, paralyzing fear about talking with an FA can ultimately mean big investment blunders.
“Advisors have to help prospects and clients put aside their fears,” says Dave Lee, director of practice intelligence, Raymond James Financial, headquartered in St. Petersburg, Florida.
Often, a prospect preparing to meet with an advisor for the first time agonizes: “‘Is this guy going to convince me to part with my money?’” says Alden Cass, a New York City-based psychologist. His practice is 50% financial advisors.
“People are still experiencing an exaggerated startle response to 2008 — similar to a symptom of post-traumatic stress — which is making them hesitant to part with money. And that’s the key problem,” says Cass, who is author, with Brian F. Shaw and Sydney LeBlanc, of “Bullish Thinking: The Advisor’s Guide to Surviving and Thriving on Wall Street” (Wiley 2008).
Wirehouse and other big-firm FAs may need to work harder to relieve client fears than advisors in the independent space. To begin with, people associate the large financial institutions with bureaucracy, a plethora of high fees — the “price” they pay for that brand name — and plenty of cross-selling; e.g., mortgages and credit cards. Even a big, fancy office can trigger anxiety in prospects, who fret that the major firm may charge more than they can afford.
But no matter the channel in which advisors work, there are several other issues that provoke client fear, including: the FA’s manner, “broker-speak,” fear of getting bad news, pushy sales tactics, feeling intimidated by the advisor’s expertise compared to their own financial ignorance, and distrust of the industry as a whole — an impression exacerbated by the global meltdown.
“When someone meets with an advisor who’s trying to sell them something and is talking at them, they go underground. That [approach] is more prevalent at the wirehouses and large firms because advisors are trained to sell people and win them over,” says Courtney Pullen, president of Pullen Consulting Group, in Denver. His clients are financial services firms and affluent families.
Even the physical environment of a client meeting can stir up angst. When the FA’s office is decked out like a living room, with sofa and chair, people are less nervous than when advisor and client talk with a big, imposing desk separating them, studies show.
Ticker symbols racing across a Bloomberg terminal and financial news blaring raise anxiety levels too.
Older clients carry greater financial fear, especially those who have gone through the Great Depression. Millennials, wary and untrusting, aren’t readily open to working with advisors, which is another sort of angst. They first need to feel that the FA understands where they’re coming from.
To assuage the fear factor, it is essential — not surprisingly — to develop a relationship with the client. But proceed slowly, starting with the discovery process.
Asking prospects to share their “deep, dark secrets and sins about money” right away isn’t the ideal approach, writes Michael Kitces on his blog, Nerd’s Eye View (www.kitces.com). “It’s important to recognize the sheer level of discomfort or even outright embarrassment that a prospective client could feel.” Thus, it’s a good idea not to make them “get (financially) naked on the first date,” advises Kitces, a partner with Pinnacle Advisory Group, in Columbia, Maryland.
If a prospect is seeking a new FA, begin with these two questions, suggests Charles Nemes, senior vice president-investments, Nemes Rush Private Wealth Management of Raymond James, in Novi, Michigan. First: “What did your previous advisor do that gave you comfort and peace?” Second: “If you could change or enhance anything about that experience, what would it be?”