Often, financial planners can face dilemmas while dealing with their clients. Read on as we explore some common dilemmas investment professionals face and how you can overcome them.
Advisors are often caught up between disclosing complex details or keeping it simple for their clients. Explaining the dilemma, the whitepaper said, “While financial ignorance leaves clients vulnerable to predatory practices, too much information leads to choice paralysis.”
However, the white paper recommends advisors to maintain transparency in the investment process and disclose all the relevant details to the clients. Evidently, sometimes clients will not understand complex investment terminologies. At times, advisors should have a jargon-free pep talk with their clients clearing all their doubts.
‘Do I teach clients a fitting rule of thumb or do I teach them a more precise formula?’, is a common question that haunts advisors.
Adopting the timesaver route may leave out vital information and can lead to poor decisions. On the other hand, shortcuts can help people make quick decisions on the basis of ready information. However, this decision based on inadequate information may always not be apt for the client.
Advisors should try and avoid using the alternative shortcut route. The shortcut route to success is short-lived. Instead, advisors should focus on the bigger picture and share all the relevant details with clients to win his trust in the long run.
Some changes can be made easily with good choice architecture while the others are difficult due to various reasons. For instance, sometimes, advisors are emotionally connected to a fund or scheme due to its attractive returns over the years. Therefore, during turbulent times when the fund or scheme underperforms, advisors are reluctant to drop that scheme or rebalance the portfolio. When such an event occurs, advisors should focus only on future outlook and take an unbiased call for the benefit of the client.