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Financial advisors often find themselves guiding clients through difficult decisions that have long-term consequences. One of the most effective tools in influencing client behavior is anticipatory regret—the ability to foresee potential regrets before a decision is even made. By helping clients imagine an undesirable future outcome and the choices that led them there, advisors can encourage better financial decision-making today.
Anticipatory regret happens when someone experiences negative emotions about a choice they haven't yet made. It involves imagining missed opportunities or potential mistakes, which in turn activates parts of the brain linked to both decision-making and emotions.
Advisors can use this tool to enhance conversations with clients, particularly by asking them to reflect on past decisions that turned out well versus those they regret.
For instance, advisors can ask: "Think about the best financial decision you've ever made. What factors contributed to that success? Did you have adequate time to prepare? Did you consult someone you trust?" Conversely, asking clients to recall a financial decision that didn't go well often reveals insights into what they wish they had done differently. This exercise helps clients recognize patterns in their decision-making, giving them a framework for making better choices in the future.
Turning Regret Into Actionable Advice
Daniel Pink's book The Power of Regret highlights the concept of foundational regret—the feeling of wishing we had planned or seen something coming. Advisors can apply this concept to financial planning by helping clients visualize an unpreferred future. For example, if a client doesn’t save enough for retirement, what might their life look like? How would they feel if they couldn’t afford adequate healthcare or became a financial burden on their family? By making these scenarios tangible, advisors can motivate clients to act now to prevent future regret.
Similarly, Susan Cain’s book Bittersweet discusses how embracing discomfort, and longing can lead to greater appreciation and more meaningful decisions. Encouraging clients to reflect on the consequences of inaction allows them to emotionally connect with their financial future, making them more receptive to sound advice.
One particularly effective strategy is scheduling "decision check-ins" at regular intervals, such as birthdays or mid-year reviews. These check-ins give clients structured opportunities to assess their financial progress and identify any areas that need adjustment before a forced choice arises. Forced choices, such as having to sell a home due to financial constraints or delaying necessary medical care due to lack of funds, often result from years of incremental decisions (or lack thereof). By proactively addressing potential challenges, advisors help clients retain control over their financial destinies.
Proactive Planning for Better Outcomes
A key takeaway for advisors is to frame discussions around future regrets in a way that encourages positive action. Rather than merely warning clients of potential pitfalls, advisors should provide clear steps to avoid them. For example:
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If a client wants to stay in their home as they age, discussing necessary modifications now can prevent a crisis later.
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If a client is supporting adult children financially, helping them set boundaries today can prevent a forced choice in the future.
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If a client struggles with portfolio management, regular reviews can keep them on track before issues escalate.
Anticipatory regret is a powerful motivator. By guiding clients through the process of imagining their future selves and the regrets they might face, advisors can help them take decisive action today. The result? More informed choices, stronger financial security, and ultimately, a future with fewer regrets.
Embrace the suck, anticipate the regret, and guide your clients to better financial decisions.
Related: Turn That Frown Upside-Down: Counterfactual Framing for Financial Advisors