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Who among us has never had worries about money? You can expect that many of your clients have experienced money worries from time to time. We know that clients can become stressed during periods of increasing market volatility or economic distress. And we’ve shared how financial advisors can help clients deal with that stress and confront fears to prevent their emotions from controlling their decisions.
But what about financial anxiety? Not only is that different from stress, but it can be much more debilitating to the psyche, causing mental paralysis in the face of important financial decisions. While stress is typically caused by external factors, such as a crashing market or rising unemployment, anxiety tends to rise internally over fears or unhealthy attitudes about the world around us.
It’s easier to de-Stress than de-anxiety
We can help clients deal with stress by encouraging them to ignore external factors and focus on things they can control. One solution to conquering clients’ financial fears is to convince clients to ignore hyperbolic headlines of events that will have little impact on their long-term investment performance and focus instead on their financial plan. That and an effective communications strategy to keep your clients informed on what’s truly important to them can go a long way to eliminating the stress in their lives.
However, eliminating financial anxiety is more challenging because it’s triggered beneath the surface. Even if you remove an external stimulus that might be causing stress, anxiety can linger because it’s formed by internal triggers.
Offering clients with financial anxiety practical solutions or game plans in an attempt to refocus them can backfire because they can become overwhelmed and emotionally unable to confront the issue causing the anxiety. They are more likely to want to curl up in a ball and avoid the situation altogether.
The challenge for advisors is clients suffering from financial anxiety may have difficulty communicating with them or following through on their financial plans.
Financial anxiety is more common than you might think.
Of course, financial anxiety may be more prevalent among people with chronic money issues, but it’s not uncommon among higher-earning professionals. According to the FINRA Foundation, 59% of wealthy households (incomes of $100,000 or more) reported financial stress. Everyday stressors include sending a child to an expensive university, caring for a parent, and unexpected healthcare expenses.
However, what you might not expect is that the same research found that financial anxiety is even more common among wealthier households. According to the same FINRA study, nearly 90% of households earning more than $100,000 reported having anxiety.
What causes financial anxiety?
To a great extent, the same factors that can cause financial stress can also cause financial anxiety. The main difference is how people respond to it. People who are stressed about high inflation may respond to a strategy to deal with it—i.e., reallocate investments and reduce spending. However, someone experiencing financial anxiety may try to avoid the issue or spend their time worrying about it and then become obsessed with the worrying. Either way, they have difficulty moving beyond it.
People who may be doing well now but have experienced money difficulties in the past can develop anxieties out of fear of a reoccurrence, such as those whose parents struggled through the Great Recession or had relationship issues around finances or some other financial trauma like a job loss or bankruptcy. The current high inflation is a new external factor for most people who may be concerned about its impact on their financial security.
How to help clients through their anxieties
The critical thing to understand when helping clients work through their anxieties is they don’t respond the same way as those who are feeling stressed. If you try to take the stressor away by giving them a plan or task list to deal with it, it won’t take away the underlying anxiety.
Here are a few best practices to help clients work through financial anxiety:
#1. Provide a safe place to talk it out
While you are not a therapist, you must do everything possible to make your clients feel comfortable speaking freely with you. People with anxieties often just need to vent. If you are genuinely attentive and can empathize verbally and nonverbally, your client may open up about the source of their angst.
You’re not there to try to change your client’s mind or propose a course of action. It’s all about giving your client the time and space to talk with someone genuinely concerned about their fears and issues.
#2. Don’t make judgments
You may have a trusting relationship with the client, but getting them to open up about their deepest feelings may require you to reinforce that trust. First, you must not make any judgments about their feelings. Instead, become the master of empathy and affirm their feelings.
Let them know you understand how hard it is for them, and gently encourage them to expand on their feelings. Just showing how much you care about their well-being will comfort them, allowing them to open up more.
#3. Be a steady source of support
People feeling anxiety don’t respond to lectures or plans of action. But they may respond to handholding. The most minor decisions can often seem overwhelming to someone anxious about the future. So, offer your hand to help guide them through it every step of the way. Set up a special meeting to help them perform a simple task, such as setting up automatic contributions to their IRA or whatever financial ‘thing’ they may be struggling with.
Simply being there as their trusted advisor can give your client the crucial confidence they need to overcome the anxiety hurdle.