Managing Clients That Use Other (Conflicting) Sources Of Advice

Author: Meghaan Lurtz

Team Kitces

In a recent re-read of the wonderful book Thinking, Fast and Slow by Daniel Kahneman, I came across a story about professional helpers falling under their own cognitive illusion, where individuals fall into the trap of having beliefs about themselves (or others) that are not true (at least not all of the time). But because these beliefs appear to be logical or believable (at least some of the time), they can be hard to recognize as incorrect. Which, in the case of financial advisors, can be problematic, as when expectations around the value and role of the advisor’s services are different between the advisor and client, confusion and resentment can potentially result!

In Kahneman’s story, a psychology professor warned students in his psychotherapy class about the power of cognitive illusion and falling prey to psychopathic charm, instructing them that if they were to ever meet a patient who came to them claiming to believe they were the only therapist who could help them (and who shared numerous past woes and failures about all of the other unhelpful therapists and psychologists they’d seen in the past), then they should stop listening to that patient and immediately throw them out of the office, without even a thought of taking on their case! The rationale of the professor’s advice lies in the premise that mental health professionals and psychologists generally have a sincere desire to help their patients. Therefore, a therapist should be extremely wary of potential cognitive illusions when presented with a patient who expresses dismay with the services of multiple past therapists but says that the prospective new therapist can be ‘the one’ to save them… because it is highly unlikely that the therapist really is the one-and-only person able to help where so many have failed before, and instead is more likely an expression of the patient seeking out sympathy from a new target that they may be able to manipulate!

For financial ‘advicers’ who, at their core, genuinely want to help their clients, they may similarly often believe that they can (and will!) be the one-and-only champion for their clients. And while this may be true to some degree, there is a more salient issue to address – not if our clients are psychopaths, but how we should respond to them and feel about our own roles if they are indeed engaged with other financial professionals and rely on other advice sources (past and present) – because the truth of the matter is that it is quite common for clients to rely on multiple sources of financial advice!

Accordingly, financial advisors may benefit from taking the time to learn about a client’s past and present financial relationships and how they make their financial decisions. Not only can this information provide important insight into how clients prefer to work and their expectations of their advisor(s), but it can also help the advisor improve the relationship with their client and provide them with better advice!

Clients Often Use Other Sources Of Financial Advice – And That’s Not A Bad Thing!

Think of the last decision or change that you made. How many people did you discuss it with? If you are thinking perhaps a few, that would be considered the norm, because it’s very common for people to consult multiple sources when making important decisions.

In fact, in the medical field, patients are encouraged to get more than one opinion. And many doctors, depending on the type of work that they do, consider it a standard practice to consult with other doctors on client cases. People are social by nature, and we rely on this natural characteristic in seeking advice from multiple sources when making a change.

Perhaps the most important (and interesting!) thing about this behavior is that we really like to get advice from others to help us with our decisions. Which is not surprising, given that research suggests we are happier and more satisfied with our decisions when we can get advice and interact with others. This tendency to seek out advice from others applies to financial planning, too.

In addition to having the satisfaction of social support and moral boost that working with others can bring, getting advice from other sources can also help clients make better decisions and establish a more well-rounded understanding of their financial plan. For instance, a study on investing confidence found that investors get advice from friends, family, banks, and financial professionals when making investment decisions – and the advice (and sources of advice) often impacted the investors’ behavior in different ways. Overconfident investors were found to trade less frequently when given investment advice from friends and family – perhaps weighing the advice from friends and family to curb trades that weren’t particularly necessary. Less confident investors traded more frequently when they had access to specialized sources of information, which suggests that other sources of financial information can help clients take action (even, ironically, if it’s sometimes counter-productive action like trading too frequently!).

Another study, particularly relevant to financial planners, examined the significance of social networks in financial-decision making across various socioeconomic levels. The study found that less wealthy households with limited means tended to rely more on social networks to provide information on savings and investments, whereas wealthier households tended to rely on paid professionals for support. Importantly, the study revealed that it was important for consumers to seek out multiple sources of advice to rely on regardless of their socioeconomic level and included a range of sources from personal social relationships to professional advisors. Which simply underscores the significance of social support and access to multiple sources of financial advice to rely on in the financial decision-making process.

These examples illustrate how it is common and totally normal for clients to get advice from multiple sources. Which suggests that advisors have little reason to get upset or disappointed when clients look for other sources of advice. Instead, they can consider these other relationships as a positive opportunity to learn about their preferred and trusted sources of advice. Additionally, listening to the client, encouraging them to open up, and giving objective and constructive feedback can also increase the client’s trust in their advisor.

More generally, this research suggests that advisors should consider proactively asking questions and soliciting information about their clients’ financial information sources, along with how they feel about those sources, as a way to identify not just what clients are inclined to pay attention to (and to ensure that those sources are actually proffering legitimate information), but also how clients may be influenced by their other sources of advice.

And who knows? Finding out that your advice aligns with the advice your client may be getting from other sources can help the client affirm the validity of your recommendations and feel more secure with more parties in agreement. It can also give the advisor valuable insight into the client’s behavior and how they prefer to go about making financial decisions.

Getting To The Root Of Other Financial Advice Sources

While it’s great for advisors when clients go to them for advice, it’s also important to remember that they often seek advice because they have not yet made a decision to take any action yet. And, if they haven’t taken any action, there may still be some resistance against moving forward with their decision or change. Some of that resistance may be due to the client’s desire for all their sources of information to be in agreement (e.g., they want their financial advisor’s advice to align with the advice they got from their friend or family members) as a way of reassuring them that they really are making the right decision.

Accordingly, it’s important for advisors not to exacerbate a client’s resistance by pushing unwanted information or encouraging conversation that the client is not yet ready for. Whether it involves sharing a belief, offering a piece of advice they may have already received, or exploring a family situation or something of historical significance to the client… if a client is not ready to delve further into the advice initially being sought, the advisor may potentially upset the client and cause them to push back with more resistance.

Consider the following scenario between Frank, the financial advisor, and his client Bob, along with the ensuing fallout:

Frank, the Advisor: Hi Bob, welcome. Thanks for coming in today. What can I do for you?

Bob, the Client: Well, I want to invest in this new stock I have been hearing about.

Frank: Bob, you know we do not do a lot of stock picking. We rely on diversification. Your current portfolio is well diversified. Making a concentrated investment into one stock, even though you are hearing it is hot, brings extra risk to the portfolio with possibly no extra return for that risk.

Bob: [a bit annoyed] Well, I hear you Frank, but the fact is that I want to hold this stock. I believe in it and this is my money; it’s my portfolio. I am sure one stock won’t hurt and it is what I want.

Frank: Bob, yes, you are correct. This is your money and your portfolio. I guess I am just surprised…

Frank now feels a bit stuck. He knows he has upset Bob, but he does not really know why or how it happened. He feels compelled to agree with Bob to avoid the situation blowing up further, and backpedals a bit at the end of the conversation, trying to ease the tension in the now-uncomfortable room.

In this situation, Frank gave advice without really hearing Bob out first, and basically set the stage for a fight that he may not have been prepared for.

But it does not have to be this way. Consider a different approach that Frank can take…

Frank the Advisor: Hi Bob, welcome. Thanks for coming in today. What can I do for you?

Bob the Client: Well, I want to invest in this new stock I have been hearing about.

Frank: Interesting. We do not tend to invest in single stocks; as you know, we rely on diversified portfolios for our clients. But tell me more. What have you heard? Let’s talk about it.

Bob: Well, my brother invested in XYZ Corp about six months ago and has made a ton of money. I have also been reading about XYZ Corp and their general rise. It seems like they have a lot of good stuff going for them and a lot of potentially good stuff ahead. Maybe it is the next Apple!

Frank: Thank you for sharing, have you read anything else about the stock or company, or spoken with anyone else about it?

Bob: Yeah, I mean. I have spoken with some of my golf buddies about it. And I even visited the CPA the other day and had a chat with her too. Tax season is around the corner, and I’m just trying to get my ducks in a row.

Frank: Sure, I need to do the same tax-wise. But clearly you are taking in lots of information about XYZ Corp from lots of sources: family, friends, even other financial professionals. I guess my question is, with all of this information, is there anything that is holding you back? I mean, and correct me if I am wrong, you could have already invested in it yourself, but instead, you have come here today to talk about it again with me. We have discussed the reasons that XYZ stock could be great, but tell me… what are your thoughts on this not being a good idea?

In the above scenario, Bob does not get upset or frustrated. There is no need for Frank to backpedal his way out of an awkward conversation, and at the same time, he is learning about Bob’s financial advice sources.

Importantly, Frank has not ignited Bob (as he did in the first conversation) to resist his advice and demand the stock purchase. And perhaps even more importantly, Frank is very aware of the fact that Bob hasn’t yet taken any action, which gives Frank the opportunity to have a conversation with Bob about the good and the bad aspects of this decision. Instead of simply denying Bob’s request to purchase a single stock holding, Frank can set the stage to let Bob potentially talk himself out of his own idea, or at the very least, to understand the true risk in moving forward and to make a sensible investment decision.

When advisors do not stop to ask their clients questions to identify the reasons they have come to their office, or to listen to the clients’ answers and feelings about the decision in front of them, clients tend to push back against any additional advice. Making time to give the client space, and asking them questions to walk you through all the advice they have already been given, what they think about it, and where they believe it could be lacking, are invaluable steps that not only help the client feel heard but keep the advisor in the loop and out of hot water!

By contrast, if the advisor jumps the gun and offers advice that the client isn’t yet ready for, we could inadvertently offend the client because it might seem like their friend, family member, or trusted source is being called out or unfairly criticized. In the scenario conversations provided earlier, Bob’s thoughts on XYZ Corp were based on conversations with friends, family, and even other financial professionals that Frank, the advisor, may know and trust. Yet Bob may have felt totally offended that Frank just shot down his brother’s ideas, or may have gotten confused by the fact that one of his trusted financial professionals (Frank the advisor) gave advice that was in disagreement with another financial professional (Bob’s CPA).

Furthermore, some clients may have spent a substantial amount of time and energy doing their own research, and when their advisor shoots down an idea that they may feel heavily vested in, it can be really discouraging and demoralizing for the client!

Understandably, advisors typically care a great deal about not offending their clients, and it can help to know that advice from other sources does not necessarily mean that it will be bad or that there can’t be some sensible way to integrate it into a workable plan. By including the advice a client gets from their friends, family members, and other trusted financial professionals, an advisor’s input could actually result in recommendations that are even better than what the advisor may have formulated without having considered the other perspectives!

Going back to Bob and Frank’s situation, above… the point is not to suggest that Frank should simply acquiesce and give into Bob’s desire for XYZ Corp. If Frank did, he could potentially be at risk of getting sued if the stock does not go well and introduces excessive risk to Bob’s portfolio. Instead, the point is that Frank has Bob opening up and sharing his perspective on what he thinks about the issue… Frank has Bob talking about the good and the bad qualities he sees in XYZ Corp. Frank might even be able to remind Bob about when investment advice from other sources didn’t pay off in the past, or ask Bob if he can recall an incident where that may have been the case. Which may serve to help Bob develop a more objective view about whether picking stocks is really in his portfolio’s best interest. For example, Bob might talk himself out of the stock; Frank and Bob may agree that they will simply watch XYZ Corp., but take no immediate action; or they may decide the next time Bob’s portfolio is due for a rebalance, that XYZ Corp be considered as part of that rebalance.

You know the saying, “Two heads are better than one.” So use the fact that a client may get advice from others as a potential learning opportunity to better understand the client and even as a chance to strengthen the bond with the client. Because humans like buy-in. Giving the client more places from which they can derive buy-in might be an effective strategy not only to get the client started on taking action on their plan, but also with staying the course with their plan over the long run!

Incorporating The Client’s Other Meaningful Advice Sources

Given the value of advice that clients receive from other sources, how can financial advisors figure out who clients are talking to, and what advice they may be getting?

Having a strategy to initiate conversations can help advisors further learn about their clients’ other sources of information, and decide how best to leverage what they learn to strengthen their bond with clients and encourage them to make better decisions.

Probe Clients Further About The Ideas For Which They Seek Second Opinions

When the client says, “I want to do X” or, “I have been hearing about Y”, it might be our natural response to just give our own opinion or advice on X and Y. However, a better way to react, and take into account that there could be multiple sources of information the client may be relying on, is to use the word “interesting”, and ask a follow-up question.

As suggested throughout this article, it is useful to engage in discussions that help the advisor understand what the client has learned from those other sources of information, as opposed to just shutting new ideas down. Advisors can start this conversation by simply asking the client to share more about what they know and the advice from others that they may have received. Some phrases that can be used to initiate such a discussion are:

• Interesting, thank you for telling me about your interest in doing X. Tell me, how long have you been thinking about this? What got you thinking about it?
• Interesting, I have heard about Y, too. Tell me, what have you learned so far and from what sources? Let’s talk more about this.

By slowing down to solicit more information about their inquiry, advisors are not only able to learn more about what information and methodologies the client values, but may also be better positioned to give unique and tailored advice.

For instance, a client who has come in to diversify their portfolio might believe they need to invest in cryptocurrency because they’ve read that popular individuals like Elon Musk and Mark Cuban think it is better than gold or that it’s the next big thing. The goal here is not to point out how the client is not Elon or Mark, nor is it to share how you feel about cryptocurrency and that the client has no clue what they are talking about. Instead, having uncovered this new idea, the goal is really simply to investigate it further.

Because it won’t necessarily help the advisor to just outright disagree (or agree!) with the client. Even if you do disagree with what they have said, the more important thing to do, that can bring value to both the advisor and client, is to have a discussion about the pros and cons of crypto investing and to learn more about why the client wants to do it (outside of the fact that Elon or Mark does it). What are they trying to achieve? Could the same outcome be achieved another way? If so, what additional ways are there?

Consider a different scenario, with a client who never moves forward with a financial decision unless their grandfather is involved. In this instance, the advisor is going to need a way to understand what the grandfather believes, what the grandfather’s level of involvement generally looks like, and why the client tends to rely on their grandfather for support in financial decision-making. Knowing that information, advisors might ask follow-up questions about the client’s ideal decision-making process. How would it involve both the advisor’s advice and grandfather’s input? How would meetings be organized and channels of communication organized? While the ‘perfect’ picture may not be totally doable, at least the advisor knows what they may need to address or consider when it comes time for the client to make decisions.

Identify The Alternate Sources Of Financial Information That Clients Rely On

Advisors already ask for a lot of personal information when meeting with a client for the first time, but how often do they ask about other sources of financial advice? After all, wouldn’t it be helpful to know if the advisor is one of 5 other planners that the client has worked with and if so, to ask why the client has seen 5 other planners and why those other advisors didn’t work out (or if the client actually still is seeking advice from some of them!?).

Some simple questions to broach this dialogue:

• Tell me, what has been your past experience working with a financial professional?
• What other financial professionals are you currently working with?
• Thanks for being here today. Before we get started, can you share if you are currently working with a financial professional, or have worked with others in the past? And if so, how has that experience been for you?
• People often work with multiple financial professionals; tell me about your professional financial network?

Some clients do tend to use more than one financial advisor, and it can be helpful to know when this is the case – not just to allow for more efficient management of the client’s total portfolio (e.g., avoiding wash sales), but also to facilitate broader collaboration to achieve a more comprehensive financial plan for the client.

For clients who have never worked with another financial advisor before, it can be useful to better understand how they did make their financial decisions in the past. Whether they relied on their own knowledge, friends and family, or other sources, can reveal a lot about how a client likes to receive and implement advice.

Which means asking follow-up questions such as:

• Thank you for sharing that. Tell me then, how or what has been your process for making financial decisions?
• Describe for me how you go about making financial decisions. How do you see us working together as a part of that process?

As advisors know, all scenarios give us a lot of useful information, and information is power. Knowing how a client works through financial decisions and who they consult (or don’t) can be vitally important for how they will work with their advisor. Learning this information upfront can make the process smoother.

Learn About Others Who Play A Role In The Client’s Decision-Making Process

Finally, it can be insightful to learn about the social dynamics between clients and those they may (or may not) rely on to make decisions. This can include their partners, spouses, other family members, or maybe even their CPA or attorney. Knowing upfront about all of the people in the client’s life who help them make decisions can expedite the decision-making process when it comes time to take action, or at the very least make it easier.

Some questions that can help the advisor explore who these people are:

• What does it normally look like when you make financial decisions, and are there others who you turn to for moral support?
• Discuss your process for financial decision-making; who do you benefit from talking to, and who matters to buy-in?

Moreover, if you know clients will be hesitant to pull the trigger without consulting these other people, consider encouraging the client to invite those people to your next scheduled financial planning meeting.

Again, people tend to feel better about their decisions when others agree with them. There is no need to take that away from the client, especially when it can add to their resolve toward change or contribute to positive feelings about the decisions that they have made.

Humans like to make decisions that involve other humans – it is simply how most of us like to operate. Getting a second opinion or accepting that two heads are often better than one can result in better decisions and can make it easier for clients to accept and implement changes that need to be made over the long haul.

Importantly, if a client seeks second opinions or approval from trusted sources other than the financial advisor, it is not necessarily an indication that the client values the financial advisor any less! Clients generally trust their advisors and value their advice; that is why they see them in the first place. In fact, accepting that the client has other trusted sources of advice might actually create more opportunities for conversations that bring about better ideas and sharing new information that the advisor wouldn’t have learned otherwise!