3 Questions to Help Anxious Clients Refocus: Excel 401(k) Digital Series

emotional decision making
(Photo: Ernest Akayeu, Dreamstime)

The coronavirus pandemic has caused stress for everyone, and plan sponsors are not immune. Advisors may find themselves fielding questions from anxious clients. During a webinar for the Excel 401(k) 2020 Digital Series, Kenneth Haman, managing director of The Advisor Institute at Alliance Bernstein Investments, referred to well-known behavioral research from Daniel Kahneman that demonstrates how advisors can guide their clients away from emotional decision making.

Related: First Advisor-Focused Behavioral Finance Designation Debuts

Kahneman’s model of fast and slow thinking explains that individual’s fast-thinking system controls instincts, while the slow-thinking system controls logic and language.

The “primitive operating system” that evolved in humans is rarely tested to the extent that our ancestors’ were. However, in a “hostile ecology,” Haman said – such as pandemic-induced volatile markets – people resort to their fast-thinking brain.

“This is a great survival trait if you’re dealing with lions and tigers and bears,” he said, but “when it comes to investments, it is the worst part of the brain to use.”

When participants and plan sponsors are highly agitated, they may not be able to explain what they’re feeling or what they need.

“One part of the brain is all about putting us into action, impulsivity, no deliberate attention, … just action, action, action, action,” Haman said. “The other part of the brain is all about logic, deliberation and slow calculations.”

Haman offered a script to help advisors get through to clients avoid emotional decision making.

What are you feeling right now? What are you thinking about?” Haman urged advisors to stay calm when faced with an agitated client and keep encouraging them to expand on their feelings.

“The words they use when they first start answering are going to be short. The sentences are going to be clipped, but as they talk, the energy of the brain will move the cerebellum back up,” he explained. The more clients talk, the better they’ll be able to articulate themselves.

“What do you think is going to happen?” Getting clients to open up about their expectations helps them analyze their own thinking, Haman said.

“They’ll start questioning their own conclusions,” he said.

“Is that what you think is going to happen or is that just how it feels right now?” This question helps clients separate their thinking from their feeling, and helps advisors transition their clients into a state where they’re ready to plan and take action.

At this point, Haman said, advisors should normalize clients’ feelings and begin offering their advice for how to address the concerns they’ve raised.

“For the rest of your career, one of the most powerful things you can do to prepare yourself to be effective with humans is to make an assessment, as soon as you’re talking with someone or as quickly as possible, which part of their brain they’re using. That’s going to tell you what you need to do to be effective,” Haman said.

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Danielle Andrus
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Danielle Andrus works as an editor for The Financial Planning Association® (FPA®).  Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits SellingSenior Market AdvisorBoomer Market Advisor, and Bank Advisor.

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