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Dan's new book for millennials, Wealthier: The Investing Field Guide for Millennials, will be published in April 2024 and available on Amazon.
As an investment advisor, you're accustomed to analyzing market trends, understanding financial products, and strategizing to achieve your clients' financial well-being. But there's one crucial question you have been overlooking:
How are you sleeping?
Surprisingly, sleep quality is a significant yet often-ignored factor that profoundly impacts the overall quality of our lives and our ability to make rational investment decisions.
The science behind sleep and decision-making
Studies consistently show a strong relationship between sleep quality, cognitive function, and decision-making abilities. Sleep deprivation, even in short durations, can impair judgment and decision-making.
A recent study used functional MRI to examine the impact of just one night of total sleep deprivation on risky decision-making behavior. It found a significant decrease in brain activation to win-and-loss outcomes, which altered the participant’s perception of risk.
According to Zhuo Fang, a co-author of the study: “These results underscore the importance of maintaining adequate sleep and how individuals should refrain from making important decisions when experiencing chronic or acute sleep deprivation.”
Obstructive sleep apnea, characterized by interrupted breathing during sleep, can significantly affect sleep quality and cognitive performance. A recent study found that patients with moderate to severe obstructive sleep-apnea syndrome displayed impaired decision-making abilities, which could be linked to reduced prefrontal cortex functioning.
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Participants had a lower rate of opting for safer options, a higher preference for risky choices, and a lower utilization of negative feedback.
This behavior is caused by changes to the brain triggered by lack of sleep, resulting in cognitive impairment.
Age and sleep quality
As we age, the quality of our sleep deteriorates. Older people wake up on average three to four times a night and are more aware of being awake.
One study found that poor sleep quality, including sleep-disordered breathing (SDB) and insomnia, can impair various cognitive functions in older adults.
Specifically, SDB is associated with attention, executive function, and memory impairments. The severity of SDB is linked to poorer global cognitive functioning and adverse outcomes in specific cognitive domains like vigilance, executive functioning, and language functioning.
Short-term sleep deprivation impairs most cognitive domains, including attention, working memory, processing speed, short-term memory, and reasoning.
How you can use these studies
Implementing the findings of the studies that show how poor sleep quality impairs decision-making should be on your radar. Here are some practical strategies to consider:
Raise the issue
Ask how your client is sleeping – especially if they seem distressed.
Discuss the importance of good sleep hygiene. This includes maintaining a regular sleep schedule, creating a restful environment, avoiding stimulants like caffeine before bedtime, and limiting screen time before sleeping. By promoting these habits, you can help your clients improve their sleep quality and their decision-making abilities.
Incorporate sleep tracking
Encouraging clients to track their sleep patterns can provide valuable insights. Various apps and wearables are available to track sleep duration and quality.
Adjust decision-making times
Suggest clients make critical financial decisions when they are well-rested. This might mean avoiding early morning or late evening decisions, often associated with lower alertness and poorer decision-making due to sleep-related factors.
Stress management techniques
Since stress can negatively impact sleep quality and decision-making, stress-management techniques, like meditation, exercise, or other relaxation methods, can help.
Final thoughts
Recognize the significant impact of sleep quality on your clients' decision-making abilities. By addressing sleep hygiene, incorporating sleep tracking, and adjusting decision-making times, you can help improve their sleep and financial well-being.
Next time you discuss investment strategies, ask, "How are you sleeping?”
Dan coaches evidence-based financial advisors on how to convert more prospects into clients. His digital marketing firm is a leading provider of SEO, website design, branding, content marketing, and video production services to financial advisors worldwide.
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