Little Known Financial Phobias

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Empathy is powerful. But it’s difficult to be empathetic if you don’t understand the underlying concerns of your clients – especially when they are deeply rooted and qualify as financial phobias.

Many advisors aren’t familiar with financial phobias. They are common and can be debilitating.

What are financial phobias?

Financial phobias are irrational and extreme fears related to money. They are often manifested by avoidance behavior, like not checking your bank account, not opening envelopes containing bills, and ignoring your finances.

Symptoms of financial phobia

Researchers at Cambridge University listed the following symptoms those with financial phobia may experience:

45% – have their heart racing 12% – feel physically ill 11% – experience dizziness 15% – become immobilized

Who do they affect?

Financial phobias can affect anyone. According to Dr. Brendan Burchell, a member of the faculty of social and political sciences at Cambridge University, those with financial phobias are often high achievers who have “become entwined in this psychological syndrome,” making it very challenging to deal with their finances.

Common financial phobias

Here are some common financial phobias:

Chrometophobia: An extreme and overwhelming fear of spending money. Even the thought of doing so can trigger a panic attack.

Plutophobia: The fear of wealth. It may seem counterintuitive, but some people fear becoming wealthy due to associated responsibilities or potential negative impacts on their lives.

Atychiphobia: The fear of failure. This phobia can prevent you from taking risks, even calculated ones, in your financial pursuits.

Peniaphobia: An intense fear of poverty. Just thinking about poverty can trigger extreme anxiety.

Understanding these phobias isn't just academic; it's a step towards empathizing with clients and designing strategies that consider their emotional well-being.

Origins of financial phobias

Like many phobias, financial ones can originate from past traumatic events or upbringing. A person who witnessed their family's home being foreclosed might develop an intense fear of debt. Someone in a household where money was scarce and never discussed might develop an aversion to financial planning.

Cultural and societal pressures can also play a role. The fear of financial failure can be heightened in societies where success is heavily equated with financial prosperity.

How common are financial phobias?

More common than you might imagine.

Over 50% of Americans fear for their financial futures, according to a 2023 survey by LendingTree.

A Capital One and The Decision Lab survey found that 77% of Americans feel anxious about their financial situations.

Impact on financial behavior

Here are some of the ways financial phobias can affect investor behavior:

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Loss aversion: They can cause investors to overly focus on avoiding losses rather than gains, leading to risk-averse behavior.

Impulsivity: They can push investors to jump into hot investments without proper research, leading to overtrading and getting caught up in speculative bubbles.

Overconfidence: They may cause investors to have an inflated sense of their ability to pick winners, leading to excessive trading and risk-taking.

Panic: Investors may sell suitable investments prematurely or hold onto bad ones too long

Phobias like fear of loss lead some investors to realize gains too quickly and let losses run.

The role of a financial advisor

Cultivate the art of being a good listener to identify and understand your clients' fears and anxieties.

When those concerns are expressed, instead of dismissing them and explaining why they have no basis, ask open-ended questions, like:

How can I help?

Can you tell me more about how you feel when you experience this fear and anxiety?

Have you considered meditation?

Would professional counseling help?

Would checking in with me more frequently be helpful?

Resist providing a “fix” unless the client makes a specific request. Nothing reflects less empathy than glibly dismissing a concern deeply felt by others.

Your office should be where clients feel comfortable discussing their vulnerabilities because they trust you to provide comfort and support.

Dan trains executives and employees in the lessons based on the research in his latest book, Ask: How to Relate to Anyone. His digital marketing firm makes extensive use of artificial intelligence to help advisors increase their SEO rankings and improve their marketing and helps advisors integrate AI into their practices.

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