- To Reduce Complexity
- To Take Action
- To Help Make Better Tradeoffs
- To Increase Confidence
- To Feel Safer
- To Offload Unpleasantness
- To Have Someone To Blame
- To Make Someone ELSE Happy
- To Receive Encouragement
- To Save Time
1) To Reduce Complexity. While there’s a virtually never-ending availability of information on the internet, having the information doesn’t mean consumers know what to do with it, especially in a domain as complex as finance (or health) where it’s hard to distinguish the meaningful from the irrelevant or the occasional pure bunk. An advisor helps to highlight which information actually matters the most.
2) To Take Action. A corollary challenge to the sheer volume of information available at our fingertips today is that not only can it be difficult to separate the signal from the noise, but that the flood of information may be so overwhelming it causes an “analysis paralysis” as the overwhelming number of choices results in inaction. An advisor can help someone take decisive action to actually get going.
3) To Help Make Better Tradeoffs. Simple financial trade-offs are simple to evaluate (e.g., a CD yielding 2% is better than a savings account yielding 0.50% if you don’t need the money anyway), but complex trade-offs are much more complex to evaluate (e.g., is it better to retain the flexibility of the portfolio but also the risk, or annuitize assets for a lifetime stream of income that also eliminates any possibility of things getting better than they are today?). An advisor can help people rationally evaluate trade-offs (despite a whole host of behavioral biases), and provide the insight and wisdom that comes from the experience of having seen the same situation many times before.
4) To Increase Confidence. Sometimes even after doing all the homework, and making a choice on the path forward, a second opinion is still valuable to help ensure that nothing important was overlooked. Because even if the decision and outcome don’t change, and the second opinion simply reaffirms the originally chosen path, it’s still reaffirming to get the confirmation. An advisor can provide confidence-building validation as an informed second opinion.
5) To Feel Safer. Because stressful financial decisions are just that – stressful – often it’s just outright mentally relieving to know that there’s an expert to rely upon, as our brains literally offload the “work” of the decision-making process when an expert is involved, saving the mental toll of even trying to figure out what the best path forward should be and the worry that it may be the wrong one. An advisor can relieve the mental stress of wondering if the decision being made is the “right” path to take.
6) To Offload Unpleasantness. In some cases, the blocking point for someone to do their own research and analysis to come up with the answer isn’t that they don’t have the skills, or the time, or the mental fortitude to handle the stress of the decision, but simply that they don’t like or want to do it, and would rather do something else with their available time. An advisor can step in to handle the tasks that people don’t want to spend their time on, so they can spend their time in ways that they’ll enjoy more.
7) To Have Someone To Blame. It is common for many couples to delegate financial responsibility to one member or the other… which, for some, is incredibly stressful knowing that if their financial situation takes a turn for the worse, they must personally face the wrath of an unhappy spouse or other family members. Delegating at least partial responsibility to an advisor can help reduce how often couples blame each other for their financial woes.
8) To Make Someone ELSE Happy. While most of the time, individuals seek out advice for themselves, sometimes the purpose of meeting an advisor is for someone else… either because they’re seeking advice on behalf of someone else, or simply because someone else has demanded that they seek help (e.g., a parent who says “you need to find an advisor because you can’t handle this inheritance by yourself). An advisor often supports relationships that go beyond just the client themselves.
9) To Receive Encouragement. For most people, money is a taboo subject, more so even than religion, politics, or sex. Which makes it especially difficult to find words of support and encouragement from friends and even family in the midst of making difficult financial decisions or changes. An advisor can provide the emotional support and encouragement, serving as someone to talk to about financial challenges that can’t be talked about with anyone else.
10) To Save Time. Even in the best of circumstances, a consumer who can both sift through the voluminous information to separate the signal from the noise and determine the best decisive course of action will still likely take a lot of time to go through the process… time that not everyone has. Even if the individual was going to arrive at the “right” answer on their own, an advisor can help someone save a lot of time going through the process.
The reason these reasons-for-seeking-advice are so important is that it highlights how the intention of an advice-seeker is often not actually about the advice-answer itself! Which in turn, helps to explain why clients don’t necessarily follow through on “the answer” when the recommendation is provided to them!
Because if the real reason for meeting with the advisor was to make someone else happy, the client’s goal might have been accomplished by just showing up, not by following through! Alternatively, if the client’s intention was actually to offload unpleasantness or have someone to blame, or simply to save time, the client may not have wanted a recommendation of what to do, and instead actually wanted the advisor to do it for them!
Simply put, if the advisor doesn’t consider the true reason for why a prospective client is seeking out their advice, it’s hard to figure out why they do or don’t implement the subsequent recommendations (or whether they ever actually were going to in the first place!)