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Financial Planning > Behavioral Finance

What Investors and Advisors Are So Stressed About

By Michael S. Fischer

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Seventy-one percent of financial advisors and 57% of investors today feel more negative stress compared with a year ago, according to research recently released by the Financial Planning Association, Janus Henderson Investors and Investopedia.

The results indicated that investors’ chief concerns centered on how to maintain lifetime income that meets expenses, but also showed they were not confident in their own financial knowledge, leading to financial insecurity and increased stress levels.

Financial advisors’ top stressors included both maintaining profitability and growth and meeting business goals.

Other findings showed a significant connection between stress and feelings of financial insecurity. Among low-stress investors, 77% said they felt financially secure ― a number that plummeted to only 39% among respondents who reported high stress.

“As a financial advisor who operates a financial planning practice, I personally cope with stress and the impact it has on me and my business, but I also see the impact stress has on my clients ― especially stress caused by financial concerns,” Evelyn Zohlen, FPA’s 2019 president, said in a statement.

“This research highlights the importance of our work as advisors as we help our clients address that stress while also taking the necessary steps to overcome stress in our personal lives.”

Julie Littlechild of Absolute Engagement conducted an online quantitative study in December and January of 336 investors and 313 financial advisors.

Effects of Stress

Half of investors in the study and 61% of advisors said they felt the biggest effects of stress were on their mood; 38% of investors and 56% of advisors cited personal relationships; and similar percentages cited health.

“Chronic stress impacts risk-based decision-making — impairing complex, flexible reasoning, and pushing us toward more rigid and habit-based actions,” Joetta Gobell, vice president of research and insights at Dotdash, Investopedia’s parent company, said in the statement.

“For both financial advisors and investors, this kind of cognitive impact can potentially lead to suboptimal decisions around investing that unfortunately only further compound or extend the stress.”

The research showed that financial advisors can help to reduce the stress investors feel. Three-quarters of investors who said they had a written financial plan reported feeling somewhat or very financially secure, compared with only half of those without a written plan.

“Stress manifests itself in many ways for investors, especially when it comes to feeling unprepared for key life stages like retirement and family planning,” Investopedia’s editor-in-chief, Caleb Silver, said in the statement. “Stressed investors are more likely to make irrational decisions that are not in tune with their financial goals.”

Among financial advisors who said they had set clear personal and professional goals, those reporting lower stress levels were much likelier to have achieved or exceeded those goals. For those struggling to meet their goals, 35% cited poor time management, 33% mindset and 27% ineffective use of technology as the main culprits.

As to the main causes of stress for financial advisors, the data showed that 65% of advisors felt that maintaining proper work/life balance was either somewhat or very stressful. Fifty-six percent said it was building a business, and 53% pointed to meeting client expectations.

“Every day in our work with advisors we see how stress permeates their personal and professional lives,” Michael Futterman, head of Janus Henderson Knowledge Labs Professional Development, said in the statement. “We have found that increased stress is getting in the way of advisors doing what they do best — taking care of their clients.”

Janus Henderson offers resources to help financial advisors cope with stress.

Michael S. Fischer

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