In the current times of extreme uncertainty, where the volatile economic situation is presenting financial challenges, advisers and investment managers are able to really add value. But the presence of financial adviser anxiety can hinder action from existing clients or cause financial avoidance from potential clients who would benefit from advice the most.
This article uncovers what we mean by financial adviser anxiety, why it matters to finance professionals, and what can be done to address it.
What exactly is financial adviser anxiety?
The term describes an individual’s negative emotions towards consulting with a finance or investment professional.
In a study of 950 Dutch adults, nearly one-third of the participants were found to have moderate to severe levels of anxiety at the prospect of visiting a financial professional. This is a significant issue – and one that is not confined to those in precarious financial positions. I’ve witnessed first-hand its existence among high net worth individuals too. It affects both those who work with a financial adviser and those who do not.
To comprehend financial adviser anxiety, let’s put ourselves in a client or prospective client’s shoes. Imagine we are considering visiting the doctor’s surgery with a potentially embarrassing ailment, which has been bothering us. We know deep down that we should address the problem, but we’re often concerned about two things:
- Firstly, a willingness to be vulnerable and share private information with our doctor. This is termed ‘disclosure anxiety’ and is particularly prevalent where a lack of trust is involved in a client-adviser dynamic. In our example, we may be apprehensive that our records are shared more broadly, or we encounter our next-door neighbour in the surgery waiting room. Alternatively, we may simply feel that by taking action to address our condition, we are legitimising it to ourselves. This in itself can often cause emotional discomfort.
- Secondly, we may be apprehensive about how the other party will perceive us. This is known as ‘evaluation anxiety’. Perhaps we should have visited the doctor months ago when we first encountered our problem. Perhaps we shouldn’t have ignored it or tried to self-medicate. We worry about how the doctor may judge our actions. We might even end up being apologetic to our doctor when we do finally seek help.
In an interview I held with a highly successful, affluent individual, they described their lack of investment knowledge as, “a terrible confession”, which they didn’t want their financial adviser to find out about. This behaviour can seem counter-intuitive. But I must reiterate – it is not uncommon.
Why do advisers need to understand these emotions?
The impacts of these feelings are damaging for both advisers and for individuals. At a minimum, they cause emotional upset for the anxious party. Finance-related concerns have been repeatedly shown to hinder overall wellbeing.
Furthermore, a common outcome of financial adviser anxiety is avoidance. Individuals may decide to ‘bury their head in the sand’. They hope that their financial concerns go away on their own or concede to live with their consequences. In a financial setting, this could result in managing tax inefficiently, taking unnecessary financial risk, missing out on financial goals, or remaining unclear about the true state of one’s personal finances. Ultimately, an avoidance approach may hinder an individual’s financial prospects.
You may have witnessed the impacts of financial avoidance when speaking with a prospective client who you know would benefit from your guidance. Though the individual may have agreed that the relationship would be economically beneficial and initially appeared keen to work with you, their interest diminishes. Their responsiveness wanes. They avoid contact. Does this sound familiar? Financial adviser anxiety can derail our best laid plans.
Alternatively, an individual reluctantly engages with professional advice, even in the presence of anxiety. However, as these negative emotions remain, they are reticent to reveal too much information to their adviser in an attempt to limit their emotional exposure.
Returning to our medical example – there is a phrase used amongst GPs called ‘the doorknob problem’. This refers to how a patient might attend an appointment in the guise of dealing with one particular medical issue when they are really concerned with something else. This can often materialise as the patient leaves the doctor’s office, with their hand on the doorknob, and says, “There was one other thing…” – finally revealing their true concern.
In a financial setting, a similar practice occurs. Even when an individual has engaged with an adviser, they do not disclose the full extent of their financial situation, their family dynamics, or their financial behaviours. This hinders the value of the advice they receive. It does not take all information into account and ultimately, does not address their main concern.
In the current climate, the ramifications of these emotions are further exacerbated. Clients may not want to show their discomfort about market volatility to their adviser. They may refuse to show their concern about future financial goals. In extreme cases, they may even liquidate portfolios or disengage from their adviser.
What can be done?
The issue of financial adviser anxiety is more common than one may have perceived. Where financial adviser anxiety hinders effective professional relationships, advisers have a responsibility to act.
The function of the financial or investment adviser is not solely an economic one. Of course, helping clients meet financial objectvies by implementing the right financial plan is certainly a large part of the role. However, the broader purpose of supporting clients in their financial wellbeing should be the professional adviser’s ultimate goal. Whether the service is delivered in a traditional face-to-face manner or through digital channels, professional advice should also help to address the negative emotions and behaviours associated with financial management.
Advisers must firstly be aware of the complex emotions that clients experience surrounding finances and help-seeking behaviour. In order for financial and investment advisers to prescribe and effective solution, the must be in a position to accurately diagnose their client’s situation.
They must then design their processes and train their staff to support clients with these emotions. By providing a supportive environment and acknowledging these common components of human behaviour, individuals can feel more comfortable in adviser interactions.
In times where uncertainty is high and returns and fees are under pressure, firms able successfully accommodate the facets of human behaviour will set themselves apart.
Applied Emotional Finance helps professionals apply knowledge of clients’ emotions and behaviours. Please take a look at the financial adviser training page for more information.