Every financial professional has asked the question: Why do clients make the choices they do — especially when those choices are counterproductive?
The answer often lies in behavioral finance — the study of how emotions and cognitive biases influence financial decisions.
When you can recognize the patterns behind a client’s thinking, you’re in a better position to guide them toward choices that align with their long-term goals — even if their instincts are telling them otherwise.
Anchor Bias in Financial Services: When one number changes everything
Clients tend to cling to the first number they hear — whether it’s an old interest rate, a high point on their portfolio, or what their friend earned on an annuity in 2022.
This “anchor” becomes their benchmark, even if it no longer reflects the current environment.
But you can use this bias to your advantage.
For example, start by discussing CD rates. Once they’ve anchored to that lower figure, you can introduce a fixed indexed annuity (FIA), which offers greater growth potential with protection. Compared to the CD, the FIA becomes a more attractive option — without overpromising.
Anchors are powerful. Frame the conversation in a way that helps clients see value through a more relevant lens.
To help ease the fear of loss, consider recommending an annuity for part of the client’s overall strategy.
Confirmation Bias in Financial Services: When clients only see what they want to see
We all love being right. So do your clients.
They’re more likely to seek out information that supports what they already believe — and filter out anything that doesn’t. That can make it hard to introduce new ideas or correct outdated thinking.
To move the conversation forward, offer balance.
Share information that affirms what they value while gently introducing alternative viewpoints. Case studies, articles, or curated reading lists can help open the door to new perspectives — without confrontation.
This creates a foundation for informed, collaborative decisions.
Recency Bias in Financial Services: When recent events feel more important than they are
If something just happened — good or bad — it tends to take up more space in a client’s mind than it should.
A recent market dip might make them want to pull out. A recent rally might tempt them to take on too much risk.
Your job is to help them zoom out.
Use historical data and examples of past market cycles to remind them that today’s events are just one part of a longer journey. Reframing short-term thinking can help reinforce the value of sticking to a long-term strategy.
Herding Bias in Financial Services: When following the crowd feels safer than going solo
Clients often feel more confident when they know others are making the same choice — even if that choice isn’t right for them.
That instinct can work in your favor.
Clients want to feel like they’re not going it alone. By showing that others in similar situations have followed a similar strategy, you validate their decision and increase follow-through.
Use client stories, examples, and social proof to show that smart, thoughtful planning is something others are doing too. It builds confidence and trust.
Uncertainty Aversion in Financial Services: When the familiar feels safer than the better option
Faced with uncertainty, clients often choose what’s familiar — even if it’s not the best long-term move.
Take cash, for example. It may feel safe in a low-yield account, but over time, inflation quietly erodes its value.
Help clients evaluate outcomes, not just comfort levels.
Goal-based planning and clearly modeled scenarios can help them get past the fear of the unknown — and toward decisions that better serve their future.
Myopic Loss Aversion: When short-term fear outweighs long-term gain
The pain of a loss hits harder than the happiness of a gain — and that can lead to overly cautious or reactionary behavior.
Clients may want to abandon their strategy after a dip, even if they’re positioned for long-term success.
To help them stay the course, set expectations around review frequency.
Encourage regular check-ins (but not too frequent) so clients avoid overreacting to daily fluctuations. And for particularly loss-averse clients, products like annuities — which offer income and downside protection — can ease the emotional toll.
Use Behavioral Insights to Strengthen Client Interaction
When you understand the psychology behind a client’s decision-making, you can speak their language, earn their trust, and guide them with confidence — even when emotions run high.
Want to explore how behavioral finance can enhance your practice?
Contact your Regional Sales Director or call our sales desk at 833-465-0819 to request a consumer-facing presentation you can use in client meetings.