Financial Advisors: Get Inside the Minds of Your Clients

inside the mind of clients

The best financial advisors know their role isn’t just about being an investment expert. It’s about holistically knowing your client: what their goals are, what’s important to them, what’s standing in their way and what biases affect their decision making.

By knowing a little bit about behavioral finance, you’ll help your clients even more.

The Buffett Way

Confirmation bias is the tendency to put more faith in information that agrees with our current beliefs than information that opposes our beliefs. Consequently, it can find its way into any decisions we make, including how we invest or save. It’s a very common bias.

For example, your client really likes energy stocks because they’ve returned a solid profit for him. You’ve tried to convince him to diversify, but he refuses and shows you research he’s done confirming his belief.

That’s confirmation bias. The client only looks for and at advice which confirms what he already believes.

It’s an issue that even billionaire investor Warren Buffett says he needs to battle. He does so by admitting he can fall victim to confirmation bias and by seeking opposing points of view.

Solution: Remind your clients that you’re providing an informed opinion guided by their goals and needs – not by what they want to hear.

Emotional Roller Coasters

The markets are at record levels! Emerging markets are the next financial crisis! Tech stocks are overvalued! It’s easy for anyone who pays attention to financial news to fluctuate between being scared or being bold in their investments.

And it’s another behavioral trap that your clients may fall into – making decisions based on short-term emotion. It’s tough not to be emotional when your hard-earned money could be affected.

Solution: Remind your clients that they need to stick to the strategy and plan that the two of you put in place. Finally, refocus their thoughts on the long-term and their investment success over the years – not days.

What They Think They Know

Confidence is a good trait to have; overconfidence, not so much. In his book “Thinking Fast and Slow”, Daniel Kahneman called overconfidence “the most significant of the cognitive biases.”

Overconfidence is when we have excessive faith in our own abilities. As a result, it leads to ignoring any biases or errors and overestimating our knowledge and ability to predict. Plus, it makes us excessively certain that our predictions and instincts are correct.

Studies show it contributes to excessive rates of stock trading and insufficient retirement planning.

Solution: Remind your client that you are focused on a portfolio that meets their goals and not focused on how others are investing. You want to stress that their plan was personalized for them, getting them where they want to go, when they want to get there.

The Body Doesn’t Lie

You thought your presentation to a client went very well, but then the client doesn’t take your advice. What happened?

According to Joe Navarro, a former FBI agent and author of “The Dictionary of Body Language: A Field Guide to Human Behavior”, by watching clients’ body language, you can learn a lot about what they’re thinking.

Pursed Lips, Lip Biting or Hand Wringing Could mean they disagree or are hesitant.

Sideways Glance It’s possible they are revealing that they aren’t sure, maybe suspicious or are not ready to commit.

Crossed Arms Do crossed arms mean the client is closed off to what you are saying? Not necessarily. According to Navarro, crossed arms give the person comfort, like a hug.

Touching or Covering the Neck Could mean the person is worried, fearful or insecure.

Stretching the Neck Or Adjusting a Collar or Tie May mean the client is feeling stress.

Solution: Navarro suggests that if you see any of the above, you ask the client what they are thinking or if everything is alright. At that point, really listen to what they are saying. Above all, reflect on what they’ve said before answering. Remember, you want to build a rapport so they trust you and you have a successful relationship.

Article by JL Watson. JL Watson has been a business writer for over 20 years, covering investing, personal finance, entrepreneurship, leadership and careers for Dow Jones NewswiresForbes, and corporate clients, including New York Life Insurance and Blue Ocean Brain.  She also writes memoirs and teaches memoir writing. Her website is She can be reached at