It’s the scary season, and it seems some people are afraid of dealing with their finances and even are afraid of working with their financial advisors, according to Teresa J.W. Bailey, president of Waddell & Associates, a wealth management firm based in Memphis and Nashville, Tenn.
“It is unfortunate, but true, that many people are afraid of dealing with their advisors, and most of it is because of a lack of communication,” Bailey said in an interview. “When the market is turbulent there is a need for more communication between advisor and client. An advisor should not hide from his or her clients because he or she does not know what to tell them.”
There also are certain things an advisor should never say. “Don’t open a conversation saying the market is horrible,” Bailey said. “That is exactly the wrong thing to say.”
Instead, an advisor should assure clients that whatever is happening in the market, it was foreseen and they will be able to weather it.
According to a recent study by Lending Tree of nearly 2,000 U.S. adults, more than half said they fear for their of financial futures, and one-third said they lose sleep due to their fear of money. Inflation and personal spending vices make it difficult for some to grow their savings, adding to financial woes, the survey showed.
“Advisors should ask clients questions to determine what is worrying them and then tell them how their portfolios are designed to deal with the reality or discuss what changes they may want to make,” she added.
Advisors, who go through the same types of conversations all day long, may forget that the client is only hearing this once. “Don’t put your brain on auto-pilot. If a conversation is not authentic, it is scary to the client,” she said.
Advisors should help the client set small, manageable goals. “Then the advisor should look at what he or she is saying and make sure the client is hearing the correct message,” she said.
Presenting objective data can help allay fears. At the same time, data can help determine whether the client’s beliefs—and fears—are based in reality.
“For instance, if a client thinks he or she cannot make any more money, see if that is really true or if the client has some options he or she may not have thought of,” Bailey said.
Advisors need to be part psychologist but that is not included in their training, so they have to develop the skill.
One of the biggest mistakes clients make because of fear is holding too much of their assets in cash. “Ease them back into the market when that is appropriate, by determining when they might actually need the money,” she said.