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?”
People immediately open up and “begin to describe their perfect client experience —which [you] should implement right away,” Nemes advises.
Surely, current market volatility has created client anxiety. Increasing the number of touches to existing accounts is therefore paramount.
Nonetheless, “wirehouse advisors feel complacent — because of managed products — and think they must only get new assets and clients because that’s what firms are pressuring them to do,” Cass says. “They feel they don’t have to communicate with the clients they already have. But advisors need to let them know they’re there for them and watching their money. They should make sure clients feel validated, heard and listened to.”
That’s why Raymond James is encouraging stepped-up advisor-client communication by providing FAs with a guidebook and webinars on how to help clients feel more comfortable in this highly unpredictable market.
“The recipe right now for minimizing fear is to stay visible and keep clients connected to their financial plans and focused on long-term goals,” says Lee.
Large-firm advisors can help prospects feel less nervous by emphasizing their firms’ stability and longevity.
“Even though we’re a local presence in a very small town, many of our best clients take comfort in knowing there’s a strong institution behind us with resources that we wouldn’t otherwise have if we weren’t part of the firm,” says Vaughan Scott, managing director and investment officer, Axiom Financial Strategies Group of Wells Fargo Advisors, in New Albany, Indiana.
Indeed, despite the financial crisis, “the wirehouse ‘brand’ still carries lots of weight,” according to John Bowen, founder-CEO of CEG Worldwide, a coaching firm for top advisors, based in San Martin, California. “Some people have more confidence in [wirehouses] because they presume they have the wherewithal to be there for the long haul.”
Yet the reality, too, is that “the industry has a bad name. It’s not one that people trust. This makes it even more incumbent on the advisor to listen to the client and establish a relationship,” says Pullen, author of “Intentional Wealth: How Families Build Legacies of Stewardship and Financial Health” (CreateSpace 2015).
To start earning trust, don’t try to gather all the client’s assets at once, Cass advises. Do a small test run to show them your value. “Let them know you want to prove their money is safe with you and that you can make them more. Explain your investment strategy. Make them feel they could be part of the market rebuilding process, rather than being on the freight train down.”
Transparency about fees and your own compensation can go far to lessen client anxiety. Above all, folks need to perceive that fees are equitable, Bowen stresses.
Show prospects a sample financial plan to ease them into the planning process. Many may be unfamiliar with it or are simply intimidated by numbers. Explain why it’s important for them to disclose a great deal of information.
Bring relief to money-embarrassed prospects by applying the psychological technique of “normalizing.”
“You can say, ‘Most of my clients have made bad decisions at some point in their lives. That’s OK’,” Klontz explains. “Everyone is so secretive about money they don’t know that others have the same financial experiences they’ve gone through.”
Listen to learn, advises Pullen. “Move from being the expert to being much more curious.”
For emotional support and a calming effect, propose that prospects bring along their spouse or another person they trust — someone who, perhaps, knows more than they about the financial services industry.
Now, a few big don’ts.
Don’t make the prospect or client feel they’re being judged for lack of financial expertise or their money mistakes. Don’t throw around industry jargon.
“Nobody wants to hear about alpha or standard deviation. They want to know, ‘Do you understand my problem, and do you think this conversation will be about how you’re going to help me meet my long-term goals?’” Lee says.
Don’t come on with a forceful sales pitch, especially when introducing yourself.
“It’s not ‘Let me sell you on me and my firm.’ What advisors need to say is, ‘Tell me about you — your aspirations, your financial goals,” Pullen notes.
Don’t ask a prospect to bring a stack of documents to the initial meeting. “Let them just come in and feel they are [being] heard. After that first good experience, do a deeper dive as you establish the relationship,” Klontz says.
Do you, as a financial advisor, have awareness that talking with an FA is scary for most people? If not, now’s the time to smell the coffee.
“I believe there’s a significant contingent of [FAs] who recognize the challenge we have [to lessen client fears]. Those who address this appropriately can make themselves and their practices more approachable,” Scott says. “This is different from decades ago when the focus was [only] on creating the maximum rate of return. Today, it’s much more about being able to engage thoughtfully with clients and for them to know you always have their best interest at heart.”