A lot of financial planners are taught that, in order to attract clients, they should try to make people excited about the products that are available. When people are excited about something, after all, they are much more likely to want it as well. One of the questions a financial planner may ask a prospective client, for instance, is how they would live if they had all the money in the world.
Choosing a Financial Planner
Making clients imagine a wonderful life that gives them great pleasure. They can come up with a range of different things, such as playing golf daily, spending more time with their family, doing volunteer work, and so on. Inevitably, a financial planner will then declare that this dream can actually be made possible, if they simply sign up for a certain plan. Because the prospective clients feel excited, at that point, they are more likely to make a quick, on the spot decision, and sign on the dotted line, even though they don’t really know what they are signing up to.
This is all down to psychology and something that financial planners are well versed in. Effectively, they want to get people to become impulsive by playing on their emotions. They want them to make quick decisions. To do this, they use jargon and other methods that people do not really understand, making it sound as if the sky truly is the limit, and people can magically make all the money they need appear. It is unfortunate that these tactics are being employed, but if you are aware of that, you can protect yourself from them. Most of us do need a financial advisor to plan for our future and retirement, so what you need to learn is how to avoid the ones who are just trying to sell you something to better their own income or career.
How to Avoid the Pitfalls
The key to making decisions is to take your time. You can also learn a little bit about the psychology of making decisions. Human beings make decisions in one of two ways. The first is the quick one, which is based on instincts and emotions, the very things sales agents will play on. The second way is logical, deliberate, and slow. What you need to learn, therefore, is how to be strong enough to not make quick decisions, but to actually take your time, breathe, and analyze what is available to you. So how can you do that? Becoming a slow thinker can be very difficult, particularly because we are conditioned to think fast when it comes to making important decisions. But if you want to invest in any financial product, including stocks and bonds or funds, you have to think carefully, slowly, and logically.
Five Ways to Think Carefully
1. Do not allow yourself to make a decision on the spot. No matter how much you tell yourself that your decision is logical, it is likely that you are wrong. You must agree with yourself that you will not make any decision in terms of your finances without sleeping on it. If a sales agent tells you that you have to decide now, then don’t even consider it. Just walk away.
2. Before you decide, list all the possible outcomes. Think about how things could go wrong, and what that means in terms of how much you lose. There is nothing on this planet that couldn’t go wrong, and if you can’t come up with any ways, then you are thinking emotionally rather than logically.
3. Change your role. Ask yourself not just what the benefits of signing up are for you, but also what the benefits are to the sales agent. When you understand that person’s motivation, you may come to see that it is not actually in your best interest.
4. Research. You are likely to be neither a financial advisor nor a psychologist. Hence, you need to make sure that you actually research, independently, whatever is offered to you.
5. Talk about it with people you trust and respect, and those you care about as well. Make sure that you discuss it with someone you know to be honest, who is one who won’t just agree with you. They don’t have the emotional attachment to your finances that you have, so they are more likely to be able to give you a real opinion.
With these five steps, you can condition yourself to think slowly. Best of all, you can apply this not just to financial decisions, but also to any other part of your life. You will quickly find that you will regret far fewer decisions overall.