Anxiety, not surprisingly, has a bit of a bad rep. At best, it’s associated with a nervy stomach and a sleepless night. At worst, it can cause longer-term, severely debilitating effects.
But we need to be wary of how we think about the concept of anxiety. For not all anxieties are created equal.
Edgar Schein, a renowned organisational psychologist, has explored the role of anxiety in relation to change. His findings are particularly useful to how we think about clients’ anxieties about personal finances.
Schein made a useful distinction between the types of anxiety people experience when considering change and learning: Surprisingly enough, he termed these two concepts Anxiety 1 and Anxiety 2…!
Understanding how anxiety motivates decision making
Let’s distinguish between them:
- Anxiety 2 is the anxiety of continuing to do something that will lead to failure. Think of this as someone rowing down a river, but getting worried that there might be a rather big waterfall waiting for them at the end…
In our case, this could be the discomfort someone feels at not knowing whether they’ll have enough to retire on, or they worry about the impact market movements will have on their undiversified portfolio. - On the other hand, Anxiety 1 is the anxiety that is associated with doing something new. Obviously, the person in the boat doesn’t like the prospect of flying over the side of a creak, but the alternative might involve jumping out of the boat into crocodile-infested waters…
In our case, this could involve the discomfort someone feels about changing their financial behaviours or making the leap to engage with a financial adviser.
Chances are, your prospective clients will experience both of these emotions at some point.
So it’s important we identify which anxieties motivate people to make the financial changes needed in their lives, and which ones stop them from doing so.
Without having any anxiety about what might lie at the end of the river, we know that people can reach the waterfall before they even realised it’s there. This could include having enough for retirement, not providing for their family after they’ve passed away or being unnecessarily over-exposed to risk.
So a reasonable level of anxiety can actually be helpful for clients.
That said, if the anxiety of the alternative option is too great, change won’t happen either.
For example, if a prospective client is concerned about losing a sense of control of their financial matters, or has mistrust in the financial advice industry, or is worried about feeling judged for the poor financial decisions they’ve made in the past.
And this is the balance we need to strike: Helping prospective clients see what lies at the end of the river they’re travelling down on, whilst also providing a clear, safe way to change course.
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