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5 Steps to Overcome Cognitive Bias, Empower Clients and Drive Action

Financial advisors, representatives and educators often find themselves sitting across the table from people who are confused, scared and uncertain what to do. The experience can feel like that of a lifeguard perched above a swimmer whose arms and legs thrash in an attempt to keep their head above water. In the same way that a lifeguard can easily swim into the depths to rescue the struggling swimmer, so too can the advisor rescue their clients. Due to knowledge, experience and objectivity, they clearly see what needs to be done in a way the client cannot.

So it can come as a surprise to advisors when a client declines to take the prescribed action. After all, the advisor swam out into the client’s financial waters and gave them a lifeline to safety and security.  

Not only did I experience circumstances similar to this in my days as a financial representative, but I witnessed similar exchanges watching advisors and representatives I managed and trained over the years. So why does this happen?

The answer is actually relatively simple.

By only presenting one option, advisors often limit their client’s ability to feel in control, which also minimizes their sense of safety and security. This is the result of a cognitive bias called single option aversion, which tells us that consumers are often not willing to purchase or invest in a product or service, no matter how attractive, if not contrasted with other options. It is this process of comparison that allows a person to identify and apply value.  

The advisor’s singular option thus becomes a dictate, instructing the client how to act, leaving them without the ability to determine value. Essentially, the advisor is giving the client an implicit ultimatum: act or don’t act. There is no middle ground. This reduces confidence, safety and, ultimately, a feeling of being in control. People need options to feel in control and they need to feel in control to be empowered to take action.

Here is a basic axiom of human behavior:

People are more likely to choose options that offer control and security, even if those options are not in their best interest. When control and security are not readily available, they will seek it out or even manufacture it.

Advisors can limit a client’s ability to feel in control in seemingly innocuous ways. How about telling someone they should start saving $350 a month in order to replace their income? Seems straightforward. But, when someone is making a decision about how to use their money, whether it is to save for retirement or buy a car, they need to have options. In this example, where they were only given one savings option, the client is likely to seek control by increasing the number of options the only way they know how: by adding inaction to the list of possibilities. With their new list of choices in place, the decision will then be driven by the pursuit of security. Taking new actions moves a person away from the perceived security of the known status quo, which makes for a riskier option. The result, then, is inaction.   

The reverse can also be true. Give people too many options and too much information and they shut down. Again, inaction rears its ugly head. All the information gets lumped into a ball of confusion, making doing nothing the safer, more comfortable decision.

Another way advisors may limit a person’s control is by presenting a goal that seems impossible to reach. Imagine you are standing at the base of a mountain trying to encourage someone to climb to the peak who’s never been above sea level. Their response will likely be some variation of, “Yeah right.” It’s too much. You need to find their optimal stretch point – the distance that will push them but still seems achievable. Maybe you climb a quarter of the way up the mountain on day one and then go a little further each day until you are cresting the peak.   

It’s the same dynamic when advising clients. You may need to stretch them, but not so far that the goal feels hopeless. The average American doesn’t believe it is within their power to save a million dollars, which is actually less than what many of them will need to replace their working income. So, an advisor is better off getting their client’s savings behaviors started with a smaller stretch goal that can be built on over time and that doesn’t erode security and confidence. Once they get started, the client’s paradigm of possibilities and what is achievable grows. This is also where providing them with multiple options is important. You show them the top of the mountain. If it’s too much, you are still giving them a path towards progress with smaller steps.

There are five things an advisor can do to help their clients feel in control.

1. Don’t distract or confuse the client with too much irrelevant information. Focus on what’s important to them. Ask questions to find out what they care about, so you can present solutions to their needs and desires, not your assumptions.
2. Present them with multiple, comparable options. When doing this, they can compare the value of each option, increasing their sense of control and confidence in their decisions.   
3. Only present two to three options at a time. If there are more than three options available to them, chunk them together so they are only deciding between two or three things at a time.
4. As an advisor, you are there to help them make beneficial changes to their lives that lead to desirable outcomes, not help them maintain their status quo. Use an assumed close. In other words, when presenting solutions, one of them should not be to do nothing at all. If you are giving them multiple choices, they are less likely to seek the additional option of inaction.    
5. Only present ethical options that help the client and are in their best interest.  

When you give clients control, you empower them. Empowered clients take action. It’s that simple.

Matt Nelson is CEO and founder of Performance Ownership Edge, LLC.

Used by permission.

Opinions expressed are those of the author and do not necessarily reflect the views of NTSA or its members.