a purchase.
The authors attributed the difference to a kind of decisional paralysis that set in as a result of having too many possibilities to sift through. The study spawned dozens of additional ones that sought to explore the conditions under which more options = less action. It has come to inform the field of consumer psychology and has led to changes in merchandising displays. Similar findings have been found in other aspects of human behaviour. For example, lonely hearts are more likely to go on dates when given an array of eight potential partners to select from than when they are shown an array of 20. Whether we’re choosing sweet toppings or sweethearts, it seems we act more decisively when the options are constrained.
A similar phenomenon exists in the world of personal finance, where people often need help to move from mere contemplation into action.6 You may be familiar with the ‘snowball’ method of debt repayment (made famous by radio host Dave Ramsey) or the ‘envelope’ method of keeping household expenses in check (made famous by your grandma). One of the reasons for the popularity of such basic approaches to financial management is that they reduce complexity and get people into action quickly. For folks who have been frozen by indecision or overwhelmed at the prospect of where to begin, these simple guidelines offer a quick, safe way to get moving in the direction of financial well-being. ‘Getting going’ leads to considerable spin-off effects in confidence and optimism, and increases the likelihood of similarly desirable behaviour changes in the future.
To save time
You could easily call up a YouTube video and learn all about chicken husbandry; even so, I’ll bet you would prefer to buy a tray of chicken wings over raising poultry in your back yard. And notwithstanding the fact that you could readily find a manual for your particular model of car, I suspect you would rather pay a mechanic to swap out your transmission than be stuck underneath the car for days on end. Most of us will gratefully pay for help that saves us time.
Expert financial advice saves time for people who are too busy, too unskilled, too stymied, or too uninterested to do things for themselves. The timesaving frequently far exceeds just the obvious, up-front benefit. For example, by taking his business taxes to an accountant, it is evident that Fred (a self-employed musician) saves himself an initial eight or ten hours of poring over instructions and filling out forms. What is less evident are the other ways in which Fred has saved time, e.g. by not having to buy his wife flowers to make up for his grumpiness, by not having to meet with personnel from the federal taxation bureau to explain all the errors he undoubtedly would have made, etc. Some of the most important time savings are the ones your clients may never even be aware that you’ve given them. When developing marketing materials, be sure to include the time-saving benefits of your services.
To offload unpleasantness
This reason is closely related to the previous point. Having access to expertise goes beyond cost–benefit analyses involving the relative value of our time versus someone else’s. Access to expertise reduces both stress and drudgery. It’s not just that I would find transmission-swapping and chicken-wrangling to be time-consuming – I would also find them to be difficult, dirty and downright yucky tasks.
In 1993, lifestyle pioneers Joe Dominguez and Vicki Robin published a book that would become one of the iconic, counter-cultural financial advice books of the last century. In Your Money or Your Life, they wrote about the exchange that people make to earn a living: namely, life energy (predominantly in the form of time and talent) in exchange for money. They challenged readers to think more deeply about that transaction, ensuring that the exchange of time for money was truly worth it to them.
Since that book was first published, there has been much scholarly research done to try and elucidate the connection between money and life satisfaction. The findings are clear that there is a positive correlation between the two. The offloading of unpleasant activities contributes significantly to that correlation. Having disposable income allows people to hire others to do those things they’d rather not do themselves. And since ‘Dealing with finances’ is right up there with ‘Having a root canal’ and ‘Waxing the bikini line’ on the list of Things Most People Find Unpleasant, financial experts have something of considerable value to offer to a great many people. (Sigh. If only it were possible to offload root canals and hair removal, too.)
To make someone else happy
Some clients show up in your office solely for the purpose of making someone else happy … or to get someone else off their back. (In my clinical practice, I refer to this as the Parole Officer Model of service delivery.) If you have been in the business for a while, you, too, undoubtedly have had people in your office who are there at someone else’s behest. They may be there to set up a prenuptial agreement, or because they have come into a trust fund, or because they are facing bankruptcy proceedings. They may be the spouses of longtime clients, those silent partners whose names are on all your paperwork but who never darken your door unless forced to do so. They may be overnight millionaires who just made it big in business or won a lottery, and who have been counselled to ‘talk to someone’ about how to deal with their changed circumstances.
Whatever the precipitating factor, such clients are often sent to you during times of tumult and change in their personal lives. Although this may not seem like an ideal situation, your help can result in remarkable peace of mind for the individual and his or her family or wider social network. It can take a little extra time and sensitivity from you to get past their initial resentment, embarrassment or discomfort over having been sent to you, but it is possible to form a vibrant working relationship with such folks.
Odds are high that they truly do need some help. It’s equally likely that the people who sent them to you need some help, too. Your task is to figure out whether it’s your help that is needed first and foremost (as opposed to the help of a therapist, attorney, or bond bailsman), and, if so, how to increase the likelihood that they will make use of it. We will be examining ways to do so in Chapters 6 and 7.
To increase confidence
Another common reason for consulting with experts is to increase confidence about an intended plan of action. Individuals want to make sure they have not overlooked any important considerations that could end up disadvantaging them. You bring extra value to the advising relationship when you employ different decision-making strategies or consult different sources of information than the clients would use on their own.
A study undertaken by the Financial Planning Standards Council of Canada has confirmed the value of the profession in this regard.7 The study followed Canadians whose net worth spanned the gamut from modest to wealthy.8 The results revealed significant increases in the financial and emotional well-being of clients who had consulted comprehensively with financial planners. Quite strikingly, there were marked increases in confidence apparent in every domain surveyed. Not only did expert financial advice increase people’s confidence that they were on track to meet important future goals, but it also increased their confidence they could deal with setbacks in life without having to forego some of the good things that money can buy in the here-and-now. Similar increases in confidence were highlighted by the Fidelity Retirement 20/20 survey report in 2017.9
Many financial advisors can cite examples of grievous over-confidence in people from their own client list.* While such clients stick out in our memory, they are not typical. It is much more common for people to seek advice because they are unsure of something, and are concerned that what they don’t know could hurt them. They want to leave your office with the certainty they have considered all of the pertinent factors and have settled on a satisfactory plan of action. If you can provide them with that confidence, they are more likely to persist with what they need to do.
To help make better tradeoffs
Consider the following questions:
Is it best to choose the lower monthly pension amount and ensure a greater survivor benefit, or opt for higher monthly payments from the outset?
Am I better off by moving to a bigger, less expensive house in the suburbs where I’d have to commute longer distances, or by staying in my tiny city house where everything is close by?
Should