FocusYOU phone numbers: Foster City and Santa Rosa

 

Focus YOU educational blog

 

It's About Context...

People frequently ask my opinion on financial issues and economic events. This blog allows me to answer their questions and provide context for those things that affect their financial health.

Why Good Clients Ignore Great Advice - Guess Post by SMI Faculty Member, Dr. Moira Somers

Stick around this life long enough, and you’ll become aware of a painful truth about the human condition: we often don’t do the things we ought to be doing for our own well-being. Researchers use the term ‘non-adherence’ to describe this lack of follow-through when it comes to advice.

 

The Complexity Barrier

Many factors contribute to financial non-adherence. Some of those are well beyond the control of the professional, whereas others fall solidly within the domain of what you can influence or direct. This article focuses on one of the major determinants of non-adherence that IS under your control – namely, advice complexity.

In my work as a financial psychologist, I frequently encounter people who are in serious need of investment or insurance advice but who refuse to darken the door of a financial professional. The number one reason they cite? "I hate those meetings. I end up feeling stupid. And I never know whether they’re exploiting my stupidity to sell me stuff I don’t need."

Skilled professionals deliver advice in a manner that makes clients feel well-informed and confident with the agreed-upon course of action. A big part of that skill lies in ensuring mutual understanding.

By contrast, unskilled advisors set clients up to feel stupid by:
     1. assuming a level of background knowledge that is not, in fact, present
     2. using jargon
     3. presenting too much information at once

 

The Curse of Knowledge

It is estimated that physicians learn over 13,000 new terms in the course of their training. I suspect financial professionals are not far behind. No matter our profession, we’re all vulnerable to something that economists have dubbed "The Curse of Knowledge": once we know something, it’s difficult to remember what it was like to not know that thing.

It’s even more difficult to understand and predict the actions of people who don’t share the knowledge. Too often, we incorrectly assume that clients have a greater degree of financial sophistication than they in fact possess.

Need proof? Consider this: according to the federal Task Force on Financial Literacy, the average Canadian does not have the requisite level of financial knowledge to understand a credit card statement or a cell phone bill.

How, then, do you suppose the average person fares when presented with a typical investment prospectus or an array of insurance options, let alone a comprehensive financial plan? "I feel like a blithering idiot!," one highly educated client told me when describing his earlier meeting with a CFP® professional. As a result, he will not be returning for a second meeting.

I happen to know the planner involved. She’s highly competent, ethical and caring. But she failed to appreciate and mitigate the Curse of Knowledge. She assumed that this prospective client’s obvious intelligence and education meant that he knew more than he did about the domain of finance. And she discovered a stark reality: in order to avoid feeling stupid, people will put their financial futures at risk.

 

 

 

Source: SMI Blog

Reprinted by permission of Sudden Money® Institute

Intentionality and Teaching by Example: Guest Post...
Rebar to Cement Your Financial Foundation: Easing ...
 

Comments

No comments made yet. Be the first to submit a comment

Have You Achieved Financial Peace of Mind?

Complete this form to download a copy of  "The 10 Must Address Financial Challenges for Peace of Mind."

 

Request a Complimentary Financial Strategy Session

*
*

Recent Blog Commentary

"What you do speaks so loud that I cannot hear what you say." ---- Ralph Waldo Emerson