Even though clients seek out and hire a financial advisor to obtain recommendations they can implement to achieve their financial goals, in practice clients often get stuck and resist taking action or making a change when the time comes. Sometimes the resistance might be based on cognitive or emotional biases, and other times it can be due to a lack of understanding or education about why the change is actually necessary or appropriate. Though in practice, with the range of potential reasons for clients to be resistant – despite having hired the advisor for advice in the first place – it can be confusing and difficult for financial advisors to know what to do to actually help the client move forward.
To help clients get over their resistance, advisors can use methods such as nudges, smart heuristics, and behavioral coaching. These methods have been designed not only to help advisors understand the client’s resistance but also to give them options for addressing the many reasons for the resistance, in a manner that aligns with both the client’s needs (as not everyone may need – or even want – behavioral coaching) and the advisor’s own capacity (advisors may not feel comfortable engaging with all of the available methods, and the time it can take in client meetings to do so).
Nudges are used to help automate processes and tasks for clients (e.g., those that clients must implement on an ongoing basis, such as automating monthly savings with a “pay yourself first” approach). They work best with clients who agree that the action is important and necessary, but who may simply need or want reminders or other mechanisms to help ensure the tasks get done. For clients who aren’t yet sure how to assess whether an action is necessary or important, advisors can use strategies involving smart heuristics, which are less about completing tasks and more about helping clients understand the issue so that they have the ability to engage in meaningful discussions with their advisor. Smart heuristics rely on ‘just-in-time’ teaching, which offers education on topics that the client is currently considering, and thus may find more relevant and meaningful.
For clients who have issues with resistance that stem beyond motivation or understanding, such as emotional biases or personal feelings, advisors can consider using an approach that involves behavioral coaching. Behavioral coaching helps the advisor guide the client to examine how their own emotions and thought processes impact their decision-making. For instance, many clients may be afraid to take action on their financial plan for fear of making a mistake. Accordingly, it is normal for them to hesitate out of fear, anxiety, or ambivalence when making financial decisions. Behavioral coaching can help clients overcome these roadblocks by slowing down to discuss the client’s hopes, dreams, fears, and concerns to ensure their plans are well-rounded and suitable for them. Because while it is important for a plan to be based on technically sound recommendations, the client needs to feel good about the plan and be on board with the recommendations in order for it to matter in the first place.
In order for advisors to choose which strategy to use with clients and when each strategy would be most effective, advisors can turn to a ‘decision tree’ model developed by Sarah Newcomb and Richard Cummings. The decision tree organizes nudges, smart heuristics, and behavioral coaching into a hierarchy that can be applied to each client’s circumstances, and sheds light on when to use one strategy over another. While nudges are helpful to simply remind clients that something needs to be done, smart heuristics can help clients understand an issue so that they can decide for themselves whether they want to take action. If neither a nudge nor a smart heuristic is sufficient to address the client’s resistance, behavioral coaching can help the client understand and work through deeper personal roadblocks.
Ultimately, the key point is that advisors have an arsenal of tools to help them work with clients who are struggling with resistance – stemming from a range of sources – that impede their progress in achieving their financial goals. By developing a plan of action implementing these tools with their clients, advisors can shed light on interesting and insightful details that can potentially result not only in the advisor creating an outstanding financial plan suitable for the client, but also in the client taking ownership over their plan and achieving their financial goals!