These heart-to-hearts should raise a client’s awareness of biases so financial decisions and downstream outcomes are improved over time. The client will understand the importance of having difficult conversations with their heirs or dependent family members, particularly in cases where they are committing to an early retirement or planning to leave fewer assets to their heirs.
In short, the advisor must be ready to display some tough love in these conversations.
Help Clients Avoid Unnecessary Panic
When an advisor has laid the groundwork from this behavioral finance perspective, they will be serving their clients effectively, enabling them to reach their goals better and faster during a period of what could be prolonged uncertainty.
Investing time with clients now so that they break through the old money script will keep them focused on long-term financial goals based on values and what’s important in their lives—such as maintaining strong bonds with their family or leaving a legacy.
The failsafe method during the turbulent and unpredictable days ahead is to track back to some of the common-sense behavioral finance principles that have seen investors and their financial advisors through intense periods of market and economic dislocation in the past.
The ongoing pandemic and shocks to the U.S. and global economy might be unprecedented. And the Ukraine-Russia conflict will doubtless continue to capture headlines and stir anxieties.
But at the end of the day, financial advisors should remember that during times like these, behavioral finance best practices can—and should—remain unchanged.
Erinn Ford is executive vice president of advisor engagement at Advisor Group, one of the nation’s largest independent wealth management firms. Kirk Hulett is executive vice president of business coaching and consulting.