Four Ways Behavioral Finance Made a Difference for My Clients

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It’s a challenging era for wealth management. Many see us as a commodity, and artificial intelligence is on its way to do much of our work for us – and in some cases, it already is.

To stand out, advisors must shift our focus to the human quality of wealth management. This often gets lost in the numbers and analysis, but clients see their money through an emotional lens, attaching feelings of security and freedom to the size of their portfolios. Down markets and shrinking portfolios can be gut-wrenching experiences. In fact, more than 85% of Americans experience anxiety surrounding money.

When a client comes to you worrying about the future and you offer charts of how the markets work and an analysis of his portfolio, your advice and prescriptions may quell his fear, but not for long. Why? Because you can’t “logic” your way out of an emotional issue.

These emotions and the behaviors they spark are precisely what my firm focuses on, and we trademarked it Behavioral Wealth Management™ – a concept that merges traditional financial advising with psychology.

Behavioral Wealth Management rests on the principle that people lead their lives one choice at a time and that the only one who knows what’s best for each person is that person. With this in mind, our financial advisors’ jobs are to help position our clients so that they are in the best place to make the best decisions as they encounter life’s critical junctions.

Putting behavioral wealth management principles into play

To deliver on that promise, financial advisors need to make sure clients are centered and thinking clearly, that they’re not over- or underestimating their options and that they’re focused on what matters most to them. Clients need to make decisions from a place of confidence, not fear. Here are a few strategies to help you help your clients do just that:

  1. Concentrate on control

Dire situations cloud judgment, and sometimes clients come in wanting to make rash, unsound decisions. Imagine that a client calls you and says her husband, age 60, is sick. Worrying about the next few years, she says she and her husband want to switch all of their assets to a bond portfolio to protect themselves.