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Financial Phobia: Conquering Clients Fears

It’s no secret that many Americans have a tough time dealing with their finances. Financial advisors have seen endless data documenting the trend and most likely they discuss these statistics with their clients – and potential clients – to help them land on the right side of the tally.

Just how serious is the impact of “financial phobia” for Americans?

Consider this:

• 44 percent of Americans say they do not have enough savings to cover a $400 emergency
• 56 percent of Americans say they have less than $10,000 saved for retirement

What is it about money, and what is it about financial topics that can drive so many people – men and women, young adults to seniors, and professional to blue collar – to put their head in the sand? That’s what “Advisors Magazine” set out to examine when we talked to financial professionals about investor fears and strategies to help clients gain the confidence to take control of their financial life.

Fear Created by Daily Media Reports
“Information overload” may best describe the daily barrage of financial news reporting from television networks, online, and print sources. Reports of stock market volatility, fluctuating interest rates, and national and global issues affecting investors’ performance can be mind-numbing for even the most financially astute. Financial professionals hear, firsthand, the confusion and fear that 24/7 media coverage causes for clients.

phobia400x600Many advisors tell their clients to ignore the everyday noise of financial news.

“We live in a time of media overflow,” Brian Orol said. As president of Strategic Wealth Management, Inc., located in Raleigh-Durham, Orol knows how easily people can be overwhelmed with financial information – especially negative reports. “We see that part of our job as financial advisors is to give our clients the ammo they need, so when they hear ‘stuff’ they can remember that ‘we’ve already talked to Brian about this and here is what I’m hearing really means and so we are already okay with this because we do understand it really doesn’t impact our long-term plan.’”

Teaching clients who is really on their side is also part of debunking the impact of media reports, according to Kevin Bradley, president and owner of Bradley Wealth Management, LLC, in Silver Spring, Maryland.

“What you read in the newspaper and hear on television is just a lot of noise,” he said. “The people that write those articles are not held accountable for anything they say in those articles. On the other hand, I, as a financial adviser, am held accountable for my strategy and my approach to a client’s funds.”

Embarrassed or Shamed by What They Don’t Know
Recent findings from the National Capability Study by FINRA (Financial Industry Regulatory Authority, Inc.) show that two-thirds of Americans cannot pass a basic financial test.

Perhaps it isn’t that people are afraid of what they don’t know; perhaps it is more that people are embarrassed by their lack of knowledge. After all, many are highly educated holding advanced degrees within their chosen profession. These are smart people. They just aren’t educated regarding finances.

“While it does sadden me that so many people feel ashamed, it doesn’t surprise me,” Meg Bartelt said about the statistic in her blog for her firm, FLOW Financial Planning, which is located in Bellingham, Washington.

She discusses how the changes in the workplace have dumped more responsibility on people. Workers that used to have pensions now have to make their own choices regarding how to save for retirement.

She talks about the success her clients achieve within their own profession and laments that they then ask her, “Why can’t I do that with my money, too?”

Instead of focusing on what they don’t know financially, Bartelt reassures her clients that it doesn’t make sense for them to try to be experts when it comes to money.

Rather, she suggests clients take small steps.

• read a book
• subscribe to a blog
• track spending for a defined period of time

Doing these things brings knowledge that removes shame, she wrote.

Lack of Ability to Discern
For Patrick Egan, co-founder of Coordinated Wealth Management based in greater Los Angeles, his biggest concern for clients is improving their ability to discern good information from misguided advice.

“They will gravitate toward what sounds good, but the problem is that what sounds good often isn’t what is good for their situation,” he said.

Egan ups his client’s discernment abilities by providing them with regular educational opportunities – he routinely teaches 45-minute classes held in the firm’s conference room.

“There is a strong need for clients to be able to understand the bigger picture when it comes to financial management. The best way to make that happen is education,” he said.

Connecting Money to the Rest of Life
Getting clients beyond the balance sheet to see how their finances intersect with the rest of their life is key, said Todd Resnick, co-founder and president of One Seven with offices in three states.

“We create an environment in which advisors can focus on those conversations with clients,” he said. “The more you, as an advisor, talk to clients and provide them with a safe place to open up, you can help them make those connections as to how the way they deal with their finances impacts the rest of their life. From there, you can formulate a plan.”

Understanding Fear
There are a plethora of quotes about the word “fear.” Perhaps the most succinct is this acronym: Fear is False Evidence Appearing Real.

Communicating with clients about their apprehensions, embarrassments, and fears surrounding financial planning, and educating and guiding them throughout the financial planning process, can help them become more confident and, overall, may help push the needle forward on American financial literacy.

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