Exploring and Overcoming Your Own Bias
We all know that many consumers walk into an appointment with some form of behavioral finance bias. Common forms of these biases include Snake-Bite Effect, Loss Aversion, and Confirmation Bias. No matter how you define them, they can all be tough obstacles to overcome. Seasoned advisors have learned over the years how to both recognize a biased client when they see one, and how to set their mind at ease. That said, some of you might not recognize the obstacles you’re creating for yourself.
Advisors can be just as biased as consumers when it comes to financial products and planning. According to a recent survey by SEI, more than 25% of advisors admitted to being overconfident in their own skills. Another 21% stated that “regret avoidance” has affected the decisions they make when mapping out client’s plan. Are you among those who might be standing in their own way? Spend some time reflecting on any biases you might be bringing to the table.
As the SEI survey revealed, advisors who are a little too sure of themselves are also those causing the biggest problems for themselves. While confidence is an invaluable asset, overconfidence can often be interpreted as arrogance. This can lead to hastily made recommendations that don’t fully account for the client’s unique situation. After all, it worked for the last person, why wouldn’t it work for the next? As great as that sounds, we all know it isn’t true. For the client, an overconfident advisor can come across as driven more by making the sale than meeting their needs. This is a great way to help your competition land the client you’ve been working so hard to convert. If this sounds like a familiar situation, take your foot off the gas pedal. Using an approach that combines active listening, probing skills and a soft touch will help overcome overconfidence.
This one is obviously at the opposite end of the spectrum. Referred to in the survey as regret avoidance, and similar to the snake-bite effect that many clients carry, an under-confident advisor will often second-guess themselves into losing the client. This often stems from a string of recommendations that don’t pan out as well as they should have. It’s natural to keep swinging for the fences, but easy to forget that even Babe Ruth struck out on occasion. When stuck in a rut, consider ways to break out of your own box. Dedicate time to reading industry-related articles, product updates, and marketing tips for a dose of inspiration. Colleagues who are willing to share their insight can also help refresh your mindset and get you back on track. An even better source can be found at the FMO you partner with (or should be partnering with). Most importantly, keep in mind that you’ve had success in the past and will have success again. Everyone gets stuck in a rut from time to time. The key to getting yourself is to remain confident in your own abilities.
This can be a difficult bias to recognize and even harder to overcome for some advisors. Seasoned advisors might have years of experience in creating long-term strategies for young families. The flipside of that experience is that you’re getting older, but those new families and prospects you’ve become so used to working with stay the same age. Over time, you might notice a growing disconnect between you and those prospects. Each new generation enters the “real world” with its own set of values, needs, and situations. These might be vastly different from those you adhere to, making it easy to get out of step with your target market. Some of you might prefer to age with your target market, which is all well and good. However, Millennials now make up the largest portion of the American workforce and will inherit the largest transfer of wealth ever. Is this really a ship you want to abandon? Probably not. An open mind and a little research can go a long way toward bridging the generational gap that divides you and a new crop of long-term clients.
Have you unintentionally been carrying any of the biases listed above? Or maybe you’re dealing with one we haven’t explored here. If so, what sort of bias-born obstacle are you dealing with and how are you trying to overcome it? We’d love to hear your story. And might even be able to offer some advice. Drop us a line and we’ll talk about it.