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Courtney

The Shocking Reality of Giving Financial Advice

The more that I work with people and their money, the more I am reminded of electricity. Money carries with it an incredible emotional charge, with the result that financial professionals must work daily with the emotional equivalent of live electrical wires. Most days, we emerge unscathed. Other days, we arrive home somewhat scorched.

In my practice as a wealth psychologist, I find that the emotional charge around money most often goes into the High Voltage Zone when parents talk about financial issues surrounding their kids (especially adult kids who are struggling in some way). It also makes itself known as clients talk about taxes, fees, inheritances, rates of return on investments, which party in the marriage is “right” in his or her view of things, and all manner of purchases, gifts, and expenditures.

We can all get zapped by the emotional current that flows through money. We can find ourselves tensing in anticipation of meeting with clients who have given us static during previous encounters. Our excellent financial advice can get burned to a crisp by the emotions surrounding money AND by the unskilled handling of them.

It’s not just clients’ emotions about money that can zap us; our own feelings can, too. I was zapped unexpectedly just this week while visiting a beautiful hotel, when my experience of delight and gratitude did an abrupt back-flip into guilt and unworthiness.  Advisers tell me about having strong emotions of their own, triggered by events including clients’ overspending or underearning, a colleague’s landing of a big account, or their own teenagers’ apparent lack of appreciation for how good they’ve got it.

Whether talking about clients or themselves, financial professionals have a tendency to view emotion as the enemy. One of my own favourite books, Daniel Kahneman’s Thinking Fast and Slow, has contributed to the unfortunate demonizing of emotion in our community. Emotions mess with good financial decision-making, we are told. They make us short-sighted, they contribute to bias, and they lead us to overlook vitally important information.

Yup, they do. And electricity causes fires and can blow holes in a body. No doubt about it.

But just as we don’t dispute the tremendous benefits of electricity, so, too, we shouldn’t demonize the energy that exists around money. Emotion itself is not the problem, here. It’s just the sway of short-term emotions that we need to be on guard for, so that we don’t over-react to temporary or irrelevant stuff.

Emotion is a valuable force that can be harnessed to accomplish important goals in clients’ financial lives. It undergirds their beliefs and their values, and signals them when something is threatening those things. It provides motivation to begin their journey towards financial security, and helps them persist in the face of setbacks. Emotion leads people to buy life insurance and write wills. It funds symphonies and ballets and theatres. It feeds the hungry.

So what should you do when you get zapped? The most important thing is to acknowledge the presence of strong emotion. If you’re with clients, say something like, “It seems that we’re onto something important here. Tell me what this issue means to you. What do I need to understand about this in order to be a good adviser to you?”

If you’re on your own when you get zapped, resist the urge to dismiss, blunt or even analyze your reaction. Just notice it with curiosity and compassion. Give it the full force of your attention, and wait for it to subside. Then you can begin the work of figuring out what, if anything, you are being signalled to pay attention to. It might be really important. Or, as Ebenezer Scrooge says, it could just be a bit of undigested beef.

Best not to confuse the two.

Interview on the Breaking Money Silence Podcast

Money Myth: Financial advisors are experts at giving advice. Season 4, Episode 67

A financial advisor can save you time and help you remain disciplined about reaching your financial goals. But are they an expert at giving advice? And should you always follow their recommendations? Listen in as Kathleen and Moira discuss the human side of finance and how advisors may need a little more training to become proficient in advice giving.

The Journey from Feedback Weenie to Feedback Zealot 

Early on in my career, both giving and receiving feedback was a painful endeavour for me. Knowing I was about to receive it brought back memories of ogre-like judges at music festivals, red ink on term papers, and rejected summer job applications. Knowing I had to give it was scarcely better. I worried my words would either wound a tender-hearted recipient, or trigger enraged blowback from a narcissistic one — say, like Glenn Close in Fatal Attraction boiling the pet bunny of the lover who rejected her. Yup, it was that bad. I was a feedback weenie, for sure.

So was Reza, one of my executive coaching clients. “I grew up in the bad old days of spanking,” Reza reported to me. “Whenever my dad was about to spank me, he would always say, ‘Son, this is going to hurt me way more than it hurts you’, and I would always think ‘Yeah, right!’ But now that I am in a position of having to mete out the equivalent of verbal discipline to my own staff, I understand what my dad meant. I absolutely HATE giving anything other than glowing evaluations.”

New York University researchers Tessa West and Katherine Thorson have been able to quantify the stress of feedback. They ran a study in which participants were asked first to engage in a mock negotiation, and then to provide feedback to their counterparts in that negotiation. Everyone was monitored for physiological and behavioural signs of stress. The results showed that subjects’ heart rates increased by as much as 50% over baseline, indicative of moderate to extreme levels of duress. There were equally sharp spikes in arousal for the feedback givers and the feedback recipients.

Want to add stress to a leader’s day? Add “deliver feedback” to his or her To Do list!

There are ways to decrease that stress. Dr. Brodie Gregory Riordan is a self-described “feedback zealot”. Her research findings have much to tell us about the art and science of feedback delivery. Here are three ways to begin :

1. Shift Attitudes through Observation

The first step often has to be a shift in attitude. Reza, for example, needed to start viewing feedback less like a harsh act of discipline and more like a caring act of teaching or coaching. I gave him an assignment to notice how many people and businesses actually went out of their way to ask him for his feedback.

By the end of a single week of observation, he had a very long list. His dentist asked him if he needed more freezing; his waiter asked him if the meal was to his liking; his personal trainer asked him if he had been excessively sore after the last workout; and on it went. This period of observation significantly changed his outlook. He saw that it was entirely possible for feedback to benefit not only performance but also relationships.

2. Proactively Ask for Feedback 

Fortified with this insight, leaders can move on to the next step: asking for feedback more regularly. That can be a hard thing for a boss to ask for, and a harder thing for employees to provide. Reza wisely started small – asking for ways to improve vacation bidding, for example, and for means of enhancing the safety of his factory – and then he worked up to meatier issues. And he taught his staff to do likewise.

The NYU researchers West and Thorson confirm that this is, indeed, a simple but powerful strategy to reduce the pain of feedback. Developing a workplace culture in which people learn to ask for feedback in a pro-active manner greatly reduces their bioreactivity. It’s hard for people to learn when they’re braced for impact; they are far more likely to benefit from it when they’re in a state of non-defensive receptivity.

3. Keep Feedback Specific and Timely 

A third strategy for reducing the pain of giving feedback is to confine your comments to specific behaviours, offering them as soon as possible after the behaviour occurs. Being specific and timely keeps leaders from extremes of turning feedback sessions into character assassinations, on the one hand, and from fretful avoidance, on the other.

This overlaps nicely with what we know about receiving feedback. Studies show that people prefer to receive any corrective or negative feedback when they are part-way through a task, while they are still in a position to do something about it. It can be completely dispiriting to receive criticism after it’s too late to fix the problem. Giving employees the chance to correct course mid-stream – something that is sometimes referred to as feedforward – is a winning strategy for leaders.

Need some strength for your own journey from Feedback Weenie to Feedback Zealot? Here are some interesting and helpful reads:

The New One Minute Manager, by Ken Blanchard and Spencer Johnson.
The authors teach one basic strategy for three different kinds of feedback scenarios. This is a great way to begin the journey.

What Got You Here Won’t Get You There, by Marshall Goldsmith.
This book is the perfect primer on feedforward.

Using Neuroscience to Make Feedback Work and Feel Better.
Written by David Rock, Beth Jones and Chris Weller at the NeuroLeadership Institute, this article is an engaging summary of the study by West and Thorson that I cited earlier in this blog.