As an advisor, I have found myself at times completely stumped by a client’s unwillingness, or seeming inability, to make changes or decisions even when presented with clear and obvious information that such a change would be in their best interest.
Of course, we all know that change, particularly in regards to money, can be overwhelming. However, in most cases of paralysis that I have seen, it is clear that the inability to move forward is not from a lack of confidence, but rather from too much information.
I have worked with a few clients over the years who cite research and projections from every known financial blog under the sun in order to defend their inability to move forward proactively. Unfortunately, this can sometimes lead to real financial losses or missed opportunities.
I was reflecting on this the other night when I found this great article from Investopedia, Information Overload: How It Hurts Investors .
The article describes exactly what I have witnessed first-hand with my own clients.
“While some investors inevitably have too little information, others have too much, which leads to panic and either bad decisions or trusting the wrong people. When people are exposed to too much information, they tend to withdraw from the decision-making process and reduce their efforts.”
Now, this is the information age after all, and there is no question that at some point all of us suffer from information overload. Usually this takes the form of an overflowing inbox or a temporary withdrawal from the blogosphere, but when it is preventing us from taking positive, actionable, steps towards improving our financial security and peace of mind, it becomes an issue to be addressed.
When it comes to financial information, there needs to be a middle ground. Too much information causes panic, too little creates an inability to make an informed decision. Neither is good. In both cases, the sufferer will withdraw, go with the status quo, or choose the path of least resistance, rather than what is the optimal decision for them. Not good.
A middle ground is a place where investors are adequately educated about their options, but not so much so that they are driven into a place of “dysfunctional overload.” (Investopedia) It is, thus, our job as advisors to ensure that we are providing our clients with the appropriate amount of sufficient, accurate, understandable information.
Equally as important is an investor’s ability to openly communicate with their advisors if they find that they simply do not understand the information, or the process, or if they need further clarification.
What this boils down to is that investors need to work with advisors that they not only trust, but that they actually have access to! Advisors that can give them the time and attention they deserve. Advisors that are dedicated to providing the necessary education required to make productive financial decisions.
Does this describe your financial advisor?