By Kremena Bachmann

Insight Overview

IDEAS IN THE INSIGHT YOU CAN PUT INTO ACTION

Financial professionals can help clients understand that financial advice, even when it is good advice, can result in bad outcomes. But a financial decision that a client makes after consulting with a professional can result in a strong emotional reaction if the decision results in losses; that reaction that can be even stronger than if the client had made the decision without advice. If clients experience loss from an investment after receiving advice from a financial professional, it is not enough for the professional to explain why the advice is nevertheless valid. Doing so improves clients’ understanding that good advice may have bad outcomes, but it will not necessarily encourage clients to keep following good advice even after losses. To help clients avoid changing their decisions for no good reason, financial professional should consider the emotional aspects of clients’ decisions, which may be related to what clients have expected from following the advice.