When Merrill Lynch adviser Stephen Stabile speaks to other planners about the benefits of behavioral finance, many duck their heads.
Stabile agrees that it’s an approach to financial planning that can be a bit more “touchy-feely” than most planners want. It leads to conversations about serious, personal topics: divorce, midlife crises and life-threatening illnesses. There’s an almost endless list of human conditions waiting for advisers who open that door.
Who wants to deal with that? Stabile does.
“No conversation is taboo for me,” Stabile told me after he was interviewed for this month’s feature story. The Merrill planner says he has seen his practice switch from seeking out new prospects to an almost all-referrals business. Why? Because Stabile says he knows how to put the latest behavioral finance tools to work. And that’s why the business now comes to him, he says.
That may be a strong incentive for advisers willing to delve a little deeper, not just to boost their business, but also to do the right thing by their clients.
“There are some people who will look at this and shake and quiver,” Stabile says. “They’re comfortable talking about a municipal bond. But they’re not comfortable talking about these types of conversations. I just think the more in depth a conversation you have with somebody, the more you connect with somebody on a personal and mental level, [and] the better you can do your job.”
Others in the industry are on the same page. Advisers “should be trying to help clients discover what [they] truly care about, rather than making investments chasing market performance,” says Svetlana Gherzi, a behavioral finance specialist at UBS in New York.
She also has encountered some skepticism among UBS advisers about the usefulness of behavioral finance. “It’s much easier to stay with the status quo,” she says. “Inertia keeps us in our comfort zone.”
And that may be keeping advisers from growing their businesses. Stabile points out that it’s not as difficult as it seems to adopt these priorities.
“For me, it’s comfortable. It’s what we do,” he says. “I think this is what good advisers do, and I think more advisers should look into it, find a certain comfort with having certain conversations above and beyond whether Janet Yellen is going to increase interest rates."