Tax season can be exciting for financial advisors — it is an opportunity to flex your tax loss harvesting skills, meet with clients, and grow your business as investors take stock of where they are and where they want to be going. For your clients, however, tax season can be a source of anxiety, particularly coming off of a 2022 that was far from portfolio-friendly and saw a number of upheavals in different corners of the market. Here are some tips for helping your clients mitigate their anxiety and trust your expertise.
Change and Uncertainty Breed Anxiety
The first step to defanging anxiety is to recognize the source of it.
The biggest stresses in life all center around change: changing a career, changing a home, change of marital status. Heck, even seemingly positive changes can create stress and anxiety. For example, psychological studies show that winning the lottery famously makes people unhappy. Even if people aren’t exactly thrilled with their status quo, it can be hard to motivate them to seek out change.
Furthermore, uncertainty always generates discomfort. This goes hand-in-hand with change, because a big part of what makes change challenging is that people don’t know what the change is going to truly be like, even if it is a change for the better. Last week’s wild markets were, in part, driven by the fear of an uncertain future being expressed by investors.
Most people are anxious about money right now, so your job is to find out what specifically is driving the anxiety. Is your client a crypto investor who is anxious over the uncertainty around how the FTX collapse will impact their taxes? Did they take advantage of last year’s strong dollar regime and invest internationally for the first time and now worry about the tax implications they face? Once you know where the specific pain points are, that can help you talk your clients down.
A Spoonful of Sugar Helps the Medicine Go Down
What’s true in physical healthcare can also be true in financial healthcare. Yes, the markets last year were rough, but there were areas that had bright spots and opportunities that manifested. A great way to assuage fears is to highlight what went right.
Even if very few things went right, you can also lean on future good news and talk about opportunities that opened up. Most people feeling anxiety need to have their emotions seen and validated (that’s the medicine), and then they need something to look forward to or feel good about (that’s the sugar.)
Emotions Come Before Reason
One challenge in dealing with clients who are emotionally wound up is that reason and logic, no matter how sound, can’t penetrate someone in the throes of emotion. Someone who is exceptionally anxious needs to be met on an emotional level before they are met on a rational one.
You can have the best tax loss harvesting plan possible and a crackerjack strategy that your client should jump for joy upon hearing about, but it means nothing if they are emotionally unable to engage. Rather than trying to drag them to meet you, you need to emotionally meet them. This doesn’t mean you need to panic and match their energy, but rather you should appeal to their emotions before you start trotting out the facts and ideas that will appeal to their logical minds.
Set the Tone To Reduce Anxiety
People are sponges: when someone around us is anxious, we get anxious. We are constantly taking our cues from one another. Projecting an aura of calm certainty and authority will cause people around you to be calm.
This means keeping your breathing regulated, paying attention to the pace and cadence you are speaking at, and minimizing your extraneous movements. If you shuffle or gesticulate too much while talking, that could give off the feeling of nervous energy (even if you actually feel calm.) Make sure you are grounded and projecting a stable calmness that your client can latch on to and hopefully use as a subconscious cue to self-regulate.