More than once, you've probably picked up the phone or had a meeting with clients who told you they had a really big "problem." I put problem in quotes because it becomes clear pretty fast that the so-called problem isn't really a problem. Turns out humans are great at projecting way into the future about something that may or may not happen. Now, things that haven't happened yet aren't the problem. It's the thinking around those future things.
Imagine a client comes to you and says, "My return just isn't high enough. I need to earn more."
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You've built a well-designed portfolio that's returning in line with your client's goals. To earn more will mean taking on additional risk. So you did a little deeper.
You say, "It would help to know what's changed. Based on your goals, the returns are right where they need to be. What's happened?"
After hemming and hawing a bit, your client blurts out that he's worried he'll run out of money before he dies. You know that's unlikely, so you keep asking questions. He then goes on to share that he had lunch with a friend who told him he was buying long-term care insurance. Since then, your client hasn't been able to stop thinking about the "problem" of running out of money.
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Of course, planning for long-term care matters. But we all know that there's little reason to upend a solid portfolio by taking on more risk to solve this so-called problem. To understand the real problem, or more accurately, the thinking around something that may or may not happen, you'll need to peel back the layers. What are your clients really thinking?
People will continue to turn things that haven't happened yet (and may never happen) into big "problems." As a real financial adviser, your trusted role gives you the opportunity to hit the pause button and help clients understand their thinking before they turn a molehill into a mountain.
Carl Richards is a certified financial planner and the author of the weekly "Sketch Guy" column at The New York Times. He published his second book, "The One-Page Financial Plan: A Simple Way to Be Smart About Your Money" (Portfolio), last year. You can email Carl here, and learn more about him and his work at BehaviorGap.com.
