How to give financial advice that sticks
Unsolicited financial advice is like stale fruit cake: most people want donors to keep it to themselves.
Yet those who are “good with the money” often want to help their struggling friends and family. Many of us remember the timely tip that made all the difference: when a colleague suggested we contribute to the business 401 (k), for example, or around this time a family member warned us about an investment that was really too good to be true.
So I turned to neuropsychologist and executive coach Moira Somers, author of “Sticky Advice: How to Give Financial Advice People Will Follow”. Her book was written for financial planners, but the techniques she suggests, supported by behavioral finance research, could be helpful to anyone who wants to give effective financial advice.
Make sure they want your advice
Even people who pay for financial advice can have a hard time following it. Somers learned what is called ‘nonadherence’ while working in the healthcare industry, and she now trains financial planners in some of the same techniques doctors use to help patients follow through on plans. treatment.
A key principle: the person being treated must “buy in” or agree that the suggested treatment is right for them. When someone hasn’t asked for your opinion, or even if they have, a good first step is to make sure they want it, says Somers.
For example, you could say, “I have seen you struggle, and I have some ideas of things that might help you. If you ever want to hear them, let me know, ”suggests Somers.
Watch your words
Some celebrity money gurus revel in shame those who turn to them for advice. Blaming people for their money problems is also a popular sport on Internet forums. But blame and shame rarely succeed in getting people to change their behavior, Somers says.
“It leaves the person feeling trapped or helpless, or really, really bad about themselves,” she says. So they closed and your advice – like this fruit cake – is quickly dismissed.
Warmth, encouragement, and empathy are better ways to reach people, she says. Even if you haven’t been in the same situation, you have undoubtedly made mistakes with the money, so you can use that to figure out how they might be feeling.
“People need to feel encouraged and supported,” Somers says.
Many people with money problems are cognitively overwhelmed, Somers says. They may be too paralyzed to act. Good counselors ask questions to better understand the barriers their clients face, she says.
“People can ask curious questions like, ‘This is something that you seem to be putting off. What is difficult for you? How can I help? Somers suggests.
Once you know their challenges, you can look for ways to reduce the friction that blocks them.
It could mean breaking a task down into simpler steps. To help customers overspend, for example, Somers first asks them to turn off one-click ordering on all of their devices. When they confirm that they have done this, she asks them to access all of their bank accounts online. When this is done, she asks them to start reviewing their transactions every day. This 1-2-3 approach works a lot better than telling people to track their spending for a month.
Supervision or support can also help people stay in business. A parent who is worried about an adult child’s debt may offer to go with them to an installment loans counselor or make an appointment with an empathetic person. Financial Advisor, Somers said.
In fact, directing someone to the right professional might be the best thing to do, she notes. Friends and family may dismiss even your best advice because there are things they don’t want to share with you, or they just need a more neutral third party to guide them.
“They may not be able to hear your advice,” Somers said. “But you can say, ‘I know someone who might be able to help you.'”
This article was written by NerdWallet and was originally published by The Associated Press.