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Understanding the Common Barriers to Client Action

Emily Koochel June 19, 2024

A couple reviews their financial information.

As a financial advisor, your goal is to help others achieve their financial goals. But what happens when potential clients face challenges preventing them from seeking financial advice altogether? Or when they’ve taken that first step, but seem resistant to implementing their financial plan?

From a mistrust of the broader finance industry to external factors and life events, there are several common barriers that may hinder consumers from working with a financial advisor or acting on their financial professional’s advice. The first step to helping your prospects and clients overcome these barriers is gaining a deeper understanding of what they are.

Here, we’ll walk through seven common barriers to action and give you practical strategies to help you identify when a client is facing them.

1. Mistrust of Financial Services

The financial services industry has faced varying levels of distrust, often influenced by negative portrayals in the media and past financial scandals. This atmosphere of mistrust can lead clients to question whether their financial advisors truly have their best interests at heart. A 2021 survey conducted by the CFA Institute, a global association of investment professionals, revealed that only 44 percent of retail investors trust financial services firms to act in their best interest.1 The survey highlighted that this trust deficit is partly due to negative media coverage and past financial scandals, which have damaged the industry’s reputation. Consequently, investors may be reluctant to fully trust their financial advisors, impacting their willingness to share personal financial information and follow professional advice.

2. Fear of Feeling Incompetent

It’s common for clients to feel uneasy or unsure when faced with financial terminology and concepts in front of their advisors. The complexity of financial topics, coupled with the weight of making significant decisions about their financial future, can exacerbate this fear. As a result, many individuals hesitate to seek advice from a financial professional due to the fear of feeling inadequate. Even when they do engage with a financial advisor, they might struggle with feelings of insecurity and lack the confidence to ask questions or act on recommendations.

3. Misconceptions About Financial Planning

A lack of clarity about what financial planning involves and who can benefit from it has created misunderstandings that deter consumers from seeking the advice they need. Many people mistakenly believe they must reach a certain level of wealth or life stage before seeking financial planning services. This misconception often arises from comparing themselves to others, such as friends or family members who are working with financial professionals. Unfortunately, this comparison can lead individuals to believe that financial planning isn’t suitable for them due to their differing financial circumstances. A study by the National Financial Educators Council found that 67 percent of Americans feel they lack the financial knowledge and confidence to consult a financial advisor, highlighting the widespread nature of these misconceptions.2

4. Overconfidence

While some individuals may feel insecure about their financial knowledge, preventing them from seeking a financial professional, others may actually overestimate their expertise by relying solely on their own knowledge and online resources. While it’s true that some individuals possess the skills and savvy to make informed decisions, others may misjudge their grasp of financial knowledge and understanding. Unfortunately, this overconfidence can often lead to a tendency to underestimate risk and overlook complexity. As a result, individuals facing this barrier may underestimate the value of a financial advisor’s advice or forego seeking guidance entirely.

5. The Feeling of Being Overwhelmed

During the onboarding process, it’s common to gather a comprehensive financial snapshot from your client. You might request that they gather their financial information or make connections directly in a client portal. However, the task of collecting and organizing data from various sources can feel daunting. Research by Vanguard found that 59 percent of clients feel overwhelmed by the amount of financial information they need to provide during the initial stages of financial planning.3 When a client is overwhelmed and anxious about completing this task, they may postpone it, seeking temporary relief from their anxiety. This avoidance can become a cycle, perpetuating the postponement in pursuit of relief.

6. External Factors and Life Events

During significant events or crises, like a global pandemic, economic downturn, or personal financial setback, many individuals feel motivated to seek financial planning assistance. However, these same circumstances can also create hesitancy when it comes to investing in financial advice. According to a 2023 study by Morningstar, economic uncertainties often prompt individuals to prioritize saving and conserving their financial resources rather than seeking professional financial guidance.4 The uncertainty and anxiety stemming from these events often lead individuals to focus on financial preservation rather than considering the benefits of professional advice.

7. Past Experiences

We all grow up surrounded by different attitudes and levels of financial knowledge. Our parents or parental figures, in particular, play a significant role as primary agents of our financial socialization. They may teach us about basic financial concepts, such as what a bank account is, through formal discussions. Or we may learn informally by observing them as they navigate financial challenges—from budgeting to heated money discussions.

Your clients’ experiences will inform their views on money, which can create barriers when you begin to build a client-advisor relationship. For instance, if your client was raised in a household where talking about money was deemed impolite, they may feel inherently uncomfortable when discussing finances with a professional.

Recognizing When Your Clients Are Facing Barriers to Action

As a financial advisor, it’s essential to recognize when a client may be facing barriers to taking action on their financial plan. One effective approach is to ask intentional, open-ended questions about your clients’ money values, goals, and past experiences. This proactive approach can help identify potential barriers stemming from their history or experiences with money.

If you suspect a client isn’t ready to take action, consider making small requests, such as asking for bank statements, to gauge the client’s transparency and willingness to share information. Resistance to providing this information could confirm underlying barriers that need addressing.

Lastly, don’t underestimate nonverbal cues. If your client is fidgeting, looks uncomfortable, or seems to be pulling back, that could be an indication that they aren’t ready to act. Take a moment to pause and check in with your client to address any questions or concerns you observe.

Help Your Clients Take Action

Recognizing the barriers that your clients may face is an important first step toward helping them take action. However, understanding alone isn’t sufficient. Your goal is to effectively motivate your prospects and clients to act, both before and after they engage with you.

To counter the misconceptions and concerns that may deter potential clients from seeking advice from a financial professional initially, ensure you clearly articulate your value proposition on your website and other marketing materials. By setting clear expectations upfront regarding your services and the types of clients you serve, your ideal clients will feel more confident about approaching you.

Once you have started working with a client, there are different strategies you can use to help break down their barriers and motivate them to take action. For more insights, check out the article Moving Clients to Action with Motivational Interviewing.

Sources:

1. CFA Institute. (2021). “Edelman Trust Barometer Special Report: The State of Investor Trust.”

2. National Financial Educators Council. (2021). “Financial Literacy and Financial Education Statistics.”

3. Vanguard. (2021). “The Adviser’s Alpha® 2021: Vanguard’s Quantitative Perspective.

4. Morningstar. (2023). “Investor Behavior in Times of Economic Uncertainty.”

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

Image of Emily Koochel
About the Author

Dr. Emily Koochel is an experienced financial professional, academic, and researcher. She currently serves as a leader for eMoney Advisor’s Financial Education and Wellness initiatives in her role as Manager of Financial Wellness. Dr. Koochel’s PhD in Applied Family Science and Master’s in Financial Planning provide a multidisciplinary lens to inform her work where she focuses on understanding the effect of financial behaviors and financial decision making on personal and financial wellness. She serves as a subject matter expert in the field, reviewing and authoring peer-reviewed journal articles, book chapters, and contributing to public scholarship. Most notably, she served as a co-author for the CFP Board’s book – The Psychology of Financial Planning - and was awarded 2020 Outstanding Research Journal Article of the Year by the Association for Financial Counseling and Planning Education. She holds the Certified Financial Therapist – I designation and is an Accredited Financial Counselor and Behavioral Financial Advisor.

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