How To Deal With High-Anxiety Clients


How to Deal with High-Anxiety Clients

March 17, 2015

by Dan Solin

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This is not an easy time to be an investor. Market volatility, often represented in the financial media through triple-digit gyrations in the Dow), creates understandable anxiety. Here’s how to assess the source of your clients’ anxiety and some tips for easing it.

A rational explanation may not work

There are many reasons for market volatility, but few investors find real comfort learning about them. These reasons include geopolitical issues, uncertainty about domestic and foreign policy and even the outbreak of terrible illnesses (remember Ebola?).

As a competent advisor familiar with the data, you understand uncertainty is part of the risk investors must accept. It’s actually the source of their returns. But it can be difficult to explain that, even when the stock market declines, there are still buyers and expected returns are actually higher.

While you counsel against market timing, the financial media is filled with self-styled “gurus” who believe they can call the highs and lows of the market. You understand that “staying the course” and broad diversification are critical to long-term investing success, but this message may not resonate with your clients, who see the value of their portfolios eroding daily.

Understand the effect of anxiety

Research  in the Harvard Business Review provides insight about how anxiety affects the ability of your clients to make rational judgments. A recent study found that participants in a state of high-anxiety were more likely to seek advice from independent third parties than those whose emotional state was more neutral.

At first blush, this would seem to be a positive effect. It makes sense that nervous clients should come to you with their concerns. However, this same research found that anxiety impaired the ability of participants to distinguish between good and bad advice. Worse still, the judgment of anxious participants was so impaired they were more inclined to take advice from those they knew had a conflict of interest.

Agitated clients come to you from a place of impaired judgment and a rational explanation will calm their nerves.

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