Financial anxiety is high. Why Financial Planners May Be Missing the Signs

The Covid-19 pandemic has made it difficult for people to answer big questions about their future, and many financial planners are underestimating the resulting financial anxiety, a survey has found.

According to researchers from the MQ Research Consortium and the Kansas State University Personal Financial Planning Program, who conducted the survey with support from the Financial Planning Association and Allianz Life Insurance Company of North America.

Yet, on average, only about 49% of financial planners thought financial anxiety affected their clients, according to the survey.

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The disconnect highlights the fact that while money is a daily topic of conversation for financial planners, for clients it’s often still taboo, said Megan McCoy, practice professor at the Kansas Personal Financial Planning Program. State University.

Moreover, there is a difference between financial stress and financial anxiety. People experience financial stress when they don’t have enough money.

Financial anxiety happens when you have money, a job, and all the hallmarks of financial security, but you’re still worried that something bad is going to happen.

For many people, the constant weight of this anxiety could be worse than a negative event that actually happens.

It’s essential to stay curious and understand where your customers feel comfortable with money.

Megan McCoy

practice professor in Kansas State University’s Personal Financial Planning Program

“Anticipatory anxiety is much more exhausting for us than the actual bad stuff,” McCoy said.

Financial planners can work to better identify clients’ financial anxieties by including a questionnaire on the topic in their client onboarding process and by seeking training to help them better identify and manage these situations as they arise. they show up, according to research.

“It’s key to stay curious and understand where your customers are at with money,” McCoy said.

The survey, which was conducted between May and June, updates research carried out in 2006.

The higher levels of anxiety seen today may indicate that clients are becoming savvier as robo-advisors and other products increasingly let them do their own financial planning.

As a result, they may be better able to express their feelings and needs around money, McCoy said.

Today’s high levels of financial anxiety are also occurring in the context of the Covid-19 pandemic, where the answers to bigger questions are more ambiguous. This includes everything from questions about the end of the pandemic to what’s happening with housing and inflation.

“That ambiguity weighs on everyone,” McCoy said.

However, Covid-19 has improved relationships between financial planners and clients in one key way – the prevalence of virtual meetings – that can last once the pandemic is over.

Clients and planners showed a preference for virtual meetings. About 57% of customers said they would prefer them even after the pandemic restrictions end. Meanwhile, 8 in 10 planners said they plan to use virtual engagements at least some of the time in the future.

The survey also identified other areas where financial planners can improve, including around communication and diversity, equity and inclusion.

Last year’s survey results found that financial planners consistently rated themselves better than their clients on communication, a reversal of the 2006 study results.

More work is needed to determine whether this is due to planners’ overconfidence or an increased willingness to criticize on the part of clients, according to the research.

Additionally, while surveyed financial planners were more diverse than they were in 2006, more work is needed to broaden the demographics of the profession, the research concludes. For example, 38% of participants in the new survey were women, up from 27% in 2006.

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