For qualified investors in Switzerland

Dealing with client anxiety: Have we failed as financial professionals?

Retirement Director Ben Rizzuto explains how anxiety can be a useful tool in helping determine what is most important to clients.

Ben Rizzuto, CFP®, CRPS®

Ben Rizzuto, CFP®, CRPS®

Wealth Strategist

9 Dec 2022
8 minute read

Key takeaways:

  • A recent study by Janus Henderson showed that, while working with a financial professional can help increase clients’ investing confidence, it does not appear to have a direct impact on their anxiety levels.
  • Even though we may not be able to help our clients feel less anxious, understanding what they are worried about is a critical aspect of creating a financial plan that takes those concerns into account.
  • To that end, the MINDSCAPE framework provides financial professionals with a set of tools to better communicate with clients by setting clearer expectations and next steps.

I recently presented a trio of research papers that we at Janus Henderson have created over the past several years at an industry conference here in Denver. One of the papers considers the idea of investor confidence and anxiety and considers whether working with a financial professional decreases levels of anxiety while increasing investing confidence.

This hypothesis stems from a couple of other pieces of research. First, the social support theory shows that people’s social networks can reduce stress and help them achieve goals. Since an individual’s financial professional would certainly be considered a critical component of his or her network – particularly when it comes to financial matters – we would assume that this relationship would help decrease anxiety.

Second, studies like Vanguard’s Advisor’s Alpha® have suggested that financial advisors who provide certain relationship-oriented services can potentially add approximately 300 basis points (bps) in extra alpha – i.e., additional net returns – for clients. That 300 bps is broken down as follows:

Service offered Typical value added for client (basis points)1
Suitable asset allocation > 0 bps*
Cost-effective implementation 34 bps
Rebalancing 26 bps
Asset location 0 to 75 bps
Spending strategy (withdrawal order) 0 to 110 bps
Total return versus income investing > 0 bps*
Behavioral coaching 150 bps
Range of total potential value added About 3% in net returns

Source: “Putting a value on your value: Quantifying Advisor’s Alpha.” Vanguard, August 2022. The actual amount of value added may vary significantly depending on client circumstances and time horizon. *Value is significant but too unique to each investor to quantify. Basis point (bp) equals 1/100 of a percentage point. 1 bp = 0.01%, 100 bps = 1%. Past performance does not predict future returns. 


It’s interesting to note that, according to Vanguard’s research, most of that potential alpha or value add is generated through behavioral coaching. This could lead to 150 bps in potential alpha and, we would hope, less anxiety.

However, Janus Henderson’s own research found that, while working with a financial professional can help increase clients’ investing confidence, it does not appear to have a direct impact on their anxiety levels.

I suspect this finding will come as a surprise to most industry professionals. In fact, prior to presenting our research at the conference, I conducted an informal poll of the audience and found that well over half believed that working with an advisor helped ease clients’ anxiety levels.

The results of our research surprised me as well. Quite frankly, they troubled me to the point of questioning whether we have we failed as financial professionals. After all, if we can’t help our clients feel less anxious, what is the value we bring to the table? This question has gained even greater significance as we continue to weather anxiety-inducing market volatility, growing recessionary fears, and inflation that is rapidly eroding investors’ spending power and depleting their savings.

Before we attempt to answer this question, I think it’s important to think about what anxiety really is. The American Psychological Association (APA) defines it as follows:

“Anxiety is an emotion characterized by feelings of tension, worried thoughts, and physical changes like increased blood pressure. People with anxiety disorders usually have recurring intrusive thoughts or concerns. They may avoid certain situations out of worry. They may also have physical symptoms such as sweating, trembling, dizziness, or a rapid heartbeat.” 1

Fear and anxiety are sometimes used interchangeably, but there is an important difference, as indicated in this statement from the APA’s definition:

“Anxiety is considered a future-oriented, long-acting response… whereas fear is an appropriate, present-oriented, and short-lived response to a clearly identifiable and specific threat.” 2 (emphasis mine)

Put simply, anxiety is apprehension about an uncertain future. And while anxiety can hardly be described as a pleasant emotion, it could be considered useful in that it helps us figure out what is important to us. For that reason, advisors should view anxiety as an emotion to work with, not fight against.

In other words, while we may not be able to turn off the internal smoke alarms many of our clients are experiencing, I would submit that we don’t necessarily want to. After all, if we don’t understand the things our clients are worried about, we can’t know what is important to them, which means we won’t be able to create a financial plan that takes those worries or goals into account.

How can we help?

As a reminder, despite not finding a relationship between financial advisor use and reduced anxiety, our research did show that clients who work with financial professionals feel a greater sense of investing confidence. (For the purposes of our research, this means they feel confident in their ability to meet their financial goals.) And the impact is significant: our research found that individuals who work with financial professionals are twice as confident as those who do not.

So while we may not be able to keep our clients from tossing and turning at night during times of tumult, there are things that we can do to help them feel more confident and stay on track to their goals. The following are a few ideas to consider on that front.

Use a menu of goals

Simply going through the process of establishing goals and tracking progress can help increase investors’ confidence. However, remember that the goal-making process can be more difficult than we realize for clients: research has shown that they may depend on mental shortcuts to deal with cognitive errors and emotional biases in deciding what those goals may be. Because of this, providing clients with a menu of specific goals may help minimize these biases and go a long way toward helping clients clearly articulate and then stick to what they hope to accomplish.3

Implement communication interventions

While times of change are inherently anxiety-producing, they also provide financial professionals opportunities to guide clients through these difficult periods. Using the right words with the right clients may allow them to “time travel” from the emotional present to a goal-oriented, calming future state.

To that end, the MINDSCAPE framework provides financial professionals with a set of tools to better communicate with clients by setting clearer expectations and next steps. Each letter describes a different influence on our behavior:

M – Messenger
I – Incentives
N – Norms
D – Defaults
S – Salience
P – Priming
A – Affect
C – Commitments
E – Ego

For example, if we are talking about market volatility, we could consider addressing the “M” and “N” influences with clients using the following talking points:

Messenger: We are strongly influenced by who communicates information to us.

Talking point: “We have navigated clients through these events in the past including the dot-com bubble burst in the early 2000s, the Global Financial Crisis of 2008, and the COVID-related sell-off in 2020. These events are difficult for clients, but we have learned many lessons from these prior experiences.”

Norms: We are strongly influenced by what others do.

Talking point: “While each client situation is different, most of our clients are staying the course.” [Cite anonymous examples if appropriate.]

Encourage collaboration

Finally, encouraging collaboration between couples when it comes to financial matters can increase confidence. Many couples take a divide-and-conquer approach when it comes to financial decisions, often due to perceived expertise or one spouse having more time than the other to handle such matters. This approach does not increase the overall financial acumen of a couple, however, and in fact may leave one partner ill-equipped to assume responsibility for the household’s finances should the need arise. Plus, our findings showed that those in households with a single decision-maker had less confidence overall than those who shared decisions equally with their partners.4

Simply put, couples that make financial decisions collaboratively tend to be more confident than couples where financial decisions are delegated to a single spouse/partner.

While some would say that it’s part of an advisor’s job to make clients less anxious – and it may in fact be something advisors have considered part of their value propositions in the past – the reality is we can’t control the future, nor can we keep clients from being anxious about it.

However, when we think about what anxiety really is, advisors should see it as one of the greatest tools at their disposal. The key is how to employ that tool effectively. When faced with an anxious client, it’s important to approach them as a trusted friend, and to inquire about what they are feeling and why they may be feeling it. Truly understanding those ideas and feelings will allow you to solidify client goals, better plan for those goals, and help clients feel more confident that they can reach them.

Lastly, if you’re interested in obtaining a flyer outlining our MINDSPACE framework, please reach out to your Janus Henderson representative.

1American Psychological Association.
3 Sin, Ray, Murphy, Ryan O. and Lamas, Samantha. “Goals-Based Financial Planning: How Simple Lists Can Overcome Cognitive Blind Spots.” Journal of Financial Planning, 2019.
4 Sommer. M., Lim, H., & MacDonald, M. (2020). “An investigation of the relationship between advisor engagement and investor anxiety and confidence.” Journal of Personal Finance, 19(2), 1-15.

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