For affluent Canadians juggling a growing menu of financial opportunities, more choice can mean more anxiety – and more opportunities to second-guess every decision.Nuthawut Somsuk/iStockPhoto / Getty Images
Between waking up and having breakfast, an investor may be warned of an impending recession, reassured by record-high markets, and wonder how a friend managed to earn a 30-per-cent return.
For affluent Canadians juggling a growing menu of financial options, more choice can mean more anxiety – and more opportunities to second-guess every decision.
“One of the most misunderstood parts about wealth is that more money doesn’t ease financial decisions. Instead, it often gives you more decisions to make,” says Jessica Keus, a wealth advisor with National Bank Financial Wealth Management in Winnipeg.
She recently began working with a client who used to leave every financial meeting with another list of choices. The problem was never a lack of knowledge or information.
“She was drowning in it,” Ms. Keus says. “What became most important was having someone say, ‘These are the three decisions that actually matter right now, and the rest can wait.’ I think that’s an underrated part of wealth management. Sometimes the most valuable thing we can give our clients is the permission not to make every decision today.”
The sophistication trap
Business owners, in particular, accumulate corporations, real estate, investments, insurance and multiple professional relationships over decades.
“The client effectively becomes the project manager of their own wealth. They shouldn’t have to be,” says Elke Rubach, principal of Rubach Wealth in Toronto.
A family might have an excellent accountant, lawyer, investment advisor, insurance advisor and banker, she says, yet remain responsible for carrying information between them and reconciling recommendations.
And once those moving parts are organized, another source of anxiety can take over, Ms. Rubach says: the pursuit of the perfect financial decision.
“One of the mistakes our industry makes is assuming that because a wealthy client qualifies for something sophisticated, sophistication itself must be valuable. Complexity has a cost even when that cost doesn’t appear on an investment statement,” she says.
“The right strategy isn’t the one that squeezes out every possible dollar of efficiency. It’s the one that serves the client’s objectives, that they can understand and comfortably maintain.”
Decision paralysis
Many affluent clients are highly analytical and accustomed to optimizing outcomes, says Bharathi Sandhu, senior business development specialist with Nava Wealth at Raymond James Ltd. in Abbotsford, B.C.
She often sees them compare strategies repeatedly, even when several good options are already available.
“There is a point at which financial optimization stops creating value and starts creating anxiety,” Ms. Sandhu says.
High achievers accustomed to measuring success through promotions, business growth or lucrative deals can begin treating their portfolios the same way.
Constant access to financial information can amplify those instincts. Investors can move easily from podcasts to market commentary to social media, collecting conflicting opinions along the way.
At its extreme, second-guessing can become paralysis. Ms. Sandhu has seen clients leave substantial sums in cash because they fear investing at the wrong time, even when they know staying there indefinitely may undermine their long-term goals.
“I often remind clients that doing nothing is still a financial decision and has consequences of its own,” she says.
Aravind Sithamparapillai, founder and financial planner at AMA Wealth Inc. in Hamilton, often sees clients postpone incorporation, restructuring or family trusts because the daily demands of running a business leave little time or mental bandwidth for bigger strategic decisions.
He’s also seeing growing demand for simpler, consolidated portfolios. One prospective client sought him out because an existing portfolio contained so many individual positions that simply reading the statements had become overwhelming.
Another client, a family planning a permanent cross-border move, rejected strategies they considered too complicated despite potentially sacrificing tens or even hundreds of thousands of dollars in tax savings.
Clients need to understand the trade-offs between the work and complexity a financial strategy requires and the potential savings it can deliver, then consider those trade-offs in the context of their broader goals and values, he says.
The ultimate goal, he says, is to simplify routine financial decisions and take more of the day-to-day work off clients’ plates.
“They can spend their time discussing with us what they care about,” he says, while more of the basics run “on autopilot in the background.”
For others, automation can remove routine decisions altogether. Automatic investment contributions and retirement withdrawals, for example, can eliminate repeated choices, while consolidating accounts can reduce paperwork and duplicate holdings.
“One of the easiest ways to reduce financial decision fatigue is to stop requiring yourself to make the same decision over and over again,” Ms. Sandhu says.
At a certain level of wealth, good advice is less about finding the next opportunity than knowing which ones can safely be ignored, she says.
“The goal of wealth management shouldn’t be to give someone more financial decisions,” Ms. Sandhu says. “It should be to help them make fewer, better ones.”