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Study: Financial Planners Underestimate Client Anxiety

Industry Trends and Research

Amid demographic shifts, economic challenges and a global pandemic, a new study finds that many financial planners are underestimating their clients’ financial anxiety. 

On average, financial planners thought financial anxiety affected about half (49%) of their clients. However, nearly three-quarters of clients (71%) reported experiencing financial anxiety, according to the study sponsored by Allianz Life and the Financial Planning Association.

To understand how financial planner and client relationships have evolved, the MQ Research Consortium and the Kansas State University Personal Financial Planning Program renewed a 15-year-old study that examined communication best practices and how they impact the trust and commitment clients have in their financial planners. The research was fielded May 25 through June 15, 2021.

Consequently, clients’ financial anxiety decreased their rating of financial planners’ ability to deliver services related to every communication topic explored in the research. As such, the study suggests that training in recognition and management of client financial anxiety could help financial planners facilitate productive meetings. 

Understanding Clients

Moreover, as a critical component of building client trust and commitment, planners should consider reevaluating their methods for getting to know and understand their clients, the study further suggests.

According to the findings, financial planners consistently gave themselves higher marks than their clients did for every communication topic category. These results were a complete reversal from the original 2006 study when clients rated their planners higher than planners had rated themselves, the researchers note. 

They emphasize that more work is needed to understand why this shift occurred, but the results suggest that a real connection with clients cannot be assumed and that there is a real gap in perceptions between the two groups. For example, planners and clients were asked if the following quantitative topics were part of their conversations:

  • Communicates recommendations in terms clients can understand (84% of planners agreed compared to 51% of clients)
  • Explains pros and cons of investments recommended to the client (80% of planners agreed compared to 46% of clients)
  • Keeps clients well informed about investment performance, especially in down markets (69% of planners agreed compared to 38% of clients)
  • Gives clients as much financial information/education as desired (83% of planners agreed compared to 47% of clients)

Planners and clients were also asked if the following qualitative topics were addressed during their conversations:

  • Open to discussing what the client values most in life (87% of planners agreed compared to 50% of clients)
  • Recommendations are based on client’s personal goals, needs and priorities (90% of planners agreed compared to 49% of clients)
  • Communicates importance of considering all areas of life when creating a financial plan (81% of planners agreed compared to 47% of clients)
  • Contacts clients on a regular basis to see what changes in life may affect the financial plan (85% of planners agreed compared to 39% of clients)

“Because financial planning is a highly individualized process, a primary goal for financial planners must be conducting a qualitative data gathering process that allows and encourages clients to communicate their values, priorities, hopes and concerns,” notes Carol Anderson, president of the MQ Research & Education. “This study confirms that financial planners who make this type of inquiry a priority will be richly rewarded with successful and satisfying long-term client relationships.”

Virtual Engagement 

The study also finds that virtual engagement is here to stay. More than half of clients (57%) expressed a preference for virtual meetings even after pandemic meeting restrictions end, whether used exclusively (29%) or with occasional in-person meetings (28%), according to the findings.  

Planners expressed a significant preference shift for virtual meetings as well. Before the pandemic, roughly one in five (21%) never held a virtual meeting, and fewer than half (46%) had used them only “sometimes.” Now, 8 in 10 expect to use virtual engagements at least some of the time going forward, with 37% expecting to use virtual meetings most of the time. 

And despite a lack of personalization, virtual meeting technology did not seem to impede many aspects of financial planning engagements as it affected only 18% of the variable relationships between communication topics, tasks and skills and desired outcomes, the study notes.