Nobody looks forward to having a difficult conversation. There are certainly people who will do whatever they can to avoid discussing topics which are painful or embarrassing.
This is especially true when the topic has something to do with money.
Our research asks investors about their attitudes and behaviors related to their investment decisions as well as specific aspects of their relationship with financial advisors. We leave no stone unturned in trying to provide answers to questions advisors ask about the clients they work for and the clients they hope to acquire in the future.
But in nearly every study we do, it is determined that investors do not always talk about their motivations or pressures that cause them to act as they do. This reluctance to discuss issues related to their financial well-being often serve no purpose other than to stand in the way of progress, which is often true in other walks of life where a conversation could be beneficial.
Advisors need to understand this dynamic and operate around it or through it. It may be difficult at times for an advisor to bring up a sore or potentially embarrassing subject, but doing so may be necessary to provide the best possible analysis and advice.
Here are three quick examples of conversations investors avoid:
- In our study Does Safe Exist: The Perils of Digital Information, only 24 percent of investors believe it is possible to keep information that is stored digitally safe from computer hacking. That’s 76 percent of investors who believe their personal information and financial data is in some danger of being stolen by hackers. And yet, only 33 percent of investors have discussed the safety of their electronic files that advisors use to house their personal and financial information. The math in that example is insane: three-quarters of all investors believe their information could get hacked, yet two-thirds of all investors have not discussed cyber-security with their advisors.
- In The Convergence of Health and Wealth, our look at the financial preparations investors make to handle their health care and long-term living arrangements when they get older, only 60 percent of non-retired investors have had any level of conversation about their eventual decisions regarding their health and life in retirement with their offspring. Only one-quarter of all investors have had significant conversations on the topic. That shows a sizable percentage of investors involved in topic avoidance.
- In our monthly survey about the financial topics of the day, we found that less than 50 of all investors have talked to their advisor about the effects the mid-term elections could have on their portfolios. Considering both the global nature of most investment strategies today and the possible effects of the mid-term elections on President Donald Trump’s ability to institute his tariffs and nationalization policy, a conversation about the impact of the elections might seem wise.
Historically, two conversations that investors shy away from are retirement preparedness and family involvement in financial matters. It has been speculated investors avoid retirement preparedness conversations because they are embarrassed by the lack of preparations they have made for retirement. There are all sorts of personal pressures and family dynamics that can make financial conversations with children, grandchildren or parents unpleasant.
But that does not mean those conversations should not occur. Sometimes, it is up to the financial advisor to bring up a topic, especially when there are financial implications to the subject matter.
It is possible that some conversations might seem invasive. A financial advisor might need to bring up the topic of family matters carefully. A similar caution might need to be taken when the topic turns to politics, as it would if the mid-term elections are discussed.
But investors can hurt themselves by avoiding tender topics.
© 2018 Spectrem Group