“Let’s set up our quarterly review”…crickets.
“Read our recent investment letter”…crickets.
“Are you looking to switch your advisor right now?”…crickets.
Financial Advisors, the crickets you are experiencing from your clients and prospects these days isn’t because they know all is fine and you’ve got it handled.
These crickets are due to one of the most profound concepts in social and behavioral science, called Information Aversion. More commonly, it's called the Ostrich Effect, first introduced in 2009 by Carnegie Mellon University economists George Loewenstein and Duane Seppi; Columbia Business School’s Nachum Sicherman and Stephen Utkus at Vanguard.
The term comes from the myth that ostriches bury their heads in the sand when faced with a dangerous situation.
Ostrich Effect states that our brains are inclined to avoid information that's painful — even if it's information that we need. Said in a different way, people want to “stick their heads in the sand!”
This form of thinking is attributed to the concept of selective exposure, which leads people to be selective in how they acquire information, by choosing which new information they want to process, and which information they prefer to avoid.
Essentially, people are selective in the information that they choose to deal with, and they sometimes actively avoid dealing with unpleasant news, even if those news contain important information.
Which highly correlates with the environment we are in. With both the stock and bond markets down significantly, investors are too afraid to open their statements, let alone speak with you to tell them that their statement is down. So they prefer to ignore a call or a meeting to review their portfolio, discuss changes or hear your strategy.
So how does this impact your reach-out to clients and prospects, those who can really benefit from your services and knowledge, especially in such challenging times, but who may be avoiding any upsetting or disturbing information these days?
There are a few suggestions we have.
The first is to keep trying. A one-time reach-out doesn’t count, and you can’t check that off your list and move on to the next client. Just like when you would appreciate people trying to call you when you are going through a rough time, even if you don’t have time or energy to speak, your clients appreciate the frequent reach out, even if they don’t want to pick up and engage. Call, leave messages, try again, email.
Don’t have time to keep trying? Automate some of your reach-outs by doing more videos and letters, so you’re showing your client you are trying. And make sure you check your email service provider to see who has and has not opened your content.
The second is to change your messaging a bit. When reaching out to prospective investors, writing about asset allocation and long term investment strategies may sound a bit tone deaf, especially in this market environment in which asset allocation hasn’t really done what it’s supposed to. Even if you may be a hard core believer in your diversified strategy, you are alienating people who are in no mood to hear theory and historical data.
Pivot your messaging a bit and focus on different ideas, such as cash management, inflation protection, estate planning or family financial education strategies.
Finally, this can be a great time to deepen your relationship with clients, COI’s and prospects BEYOND investing. Start inviting them to golf outings, wine tastings, cooking events, movies or events, given that now more people want to get social in a post-Pandemic world. They will appreciate seeing you in a different frame of reference.
Aren’t a social person? Your clients don’t want to hang out with you? Then send them more articles and blogs that may be around their passions. We can all use some HAPPY NEWS these days!
Tools and strategies for financial advisors to grow their practice during a bear market, or a period of heavy uncertainty, such as a leadership change or M&A. At the core of this will be your mindset, emotional state and your level of optimism and energy.