Tips for Empowering Fearful Investors

Tips for Empowering Fearful Investors

November 09, 2021

There are lots of "unknowns" for investors to be afraid of in the world we live in, so make sure that you and your practice are not on their list of fears. Meaning, most humans have an instinctive aversion to danger, with one of the most feared dangers being that of the unknown. We are built this way because danger can harm us (physically, mentally/emotionally, and financially). The human brain and adrenal system work to combat eminent danger with age-old reactions like fight, flight or freeze, among others.

Look at your own financial practice and understand that an unknown fear can trigger one of the above reactions in a prospective investor. I’m sure you can think of a situation where you had an unexpected reaction from a prospect or client that resulted in a negative outcome for your business. Your ego may write off these scenarios to protect you emotionally having you thinking it was “their problem, not your problem”, but your ego protecting your self-image doesn't protect your business plan. Though you may never know the true cause of an investor’s fears, think about how you can look inward to make your firm less stressful for an investor, allowing them to be more open with their thoughts and feelings.

Here are three easy things you can do to help investors overcome their fears and give you a less stressful business:

 1.  Be proactive, not reactive. 

Ask your investors what they are afraid of while using empathy (which equates to listening carefully to the investor without a product in your mind). Understanding their fears gives you a guide to their possible reactions and behaviors in certain situations which helps you to deepen the relationship.  Examples of understanding their fear and using it as a guide:

  •  If your client demonstrates fear of a "lack of control", it’s your job to help them to understand that the financial plan you are building together will allow them to gain more control, not less. Using respectful language and explaining the plan in   a way that is not overwhelming may dampen their fears of “losing control".
  •  Past negative life experiences can exacerbate fears, so if an investor tells you they’ve had assets illiquid at some point, you probably won’t want to suggest a product that “locks” up their money and triggers that fear for them.
  •  Realize that unpredictable and volatile environments can escalate fears of the unknown. If times are stressful, don’t make yourself one of the “unknowns” that investors fear.


2.  Make yourself more approachable (yeah, really):

Believe it or not, advisors that have been in business for quite some time, may stop paying attention to the little things that can make a client feel more at ease. Try keeping these things in mind:

  • smiling and using non-threatening eye contact,
  • using body language that is not intimidating,
  • listening carefully and sharing your own stories when appropriate,
  • being available and accessible,
  • using language that accommodates them, not confusing jargon.

3.  Understand that investors can catastrophize the outcomes of their own decisions and their relation to unknown events.

This is a real emotional thing that happens with humans, and even if you feel it to be unfounded when you recognize it, it needs addressed:

  • Help stop investor anxiety by addressing it right away with the clarity that RiskPro brings to the conversation.
  • Demonstrate to investors a forward-looking timeline using volatility data of their current AND proposed investments.
  • Allow investors to clearly see and understand their possible investment outcomes, empowering them to make confident decisions that fit their lifestyle and aspirations.

Fear of the unknown is every investor's worst enemy. Being mindful and respectful of their fears while revealing the unknown with RiskPro gives your investors the control and confidence they need to succeed. Strong advisor/client relationships are key to building your practice experience with less stress, more clarity, and the ultimate success!


Disclosure:  ProTools, Inc. is the developer of RiskPro, a web-based investment risk analysis and portfolio construction tool. ProTools, Inc. is not licensed to provide investment products and services. Such services can only be provided through registered broker dealers who are FINRA members or registered investment advisers appropriately registered in the jurisdiction for which services are provided. ProTools, Inc. is wholly owned by Pacific Holdings, Inc. and through common ownership is affiliated with Pacific Financial Group, LLC (“PFG”) and The Pacific Financial Group, Inc. (“TPFG”) which are each SEC registered investment advisers. TPFG and PFG only provide advice to investors pursuant to a written agreement between the firm and the client and only after the appropriate disclosures have been made. Nothing contained in this website or the use of RiskPro shall be construed as the provision of investment advice or the recommendation to purchase or sell a security or investment product through TPFG or PFG unless otherwise memorialized by a written agreement acknowledged by the investor(s) and accepted by TPFG or PFG.