The Benefits of Overcoming Your Denial Of AI

The psychology of risk aversion

At the core of a financial advisor’s psyche lies an inherent aversion to risk, a trait that has served them well in navigating the turbulence of markets and investments. However, this quality can become a double-edged sword when confronted with the uncertainties of new technology.

When combined with the status quo bias, the fear of loss can lead advisors to cling to familiar methods and tools, even when presented with compelling evidence of the potential benefits of innovation.

Don’t underestimate the power of these combined biases.

In one study, younger workers were more likely to sign up for better health insurance plans with lower premiums and deductibles. Older employees stuck with the less favorable plan, perhaps out of a concern for minimizing potential losses or just fear of a new, unknown plan.

The anchoring effect

The human brain is a remarkable pattern-recognition machine, but this strength can also be a weakness. Through years of experience and training, financial advisors have established robust neural pathways dedicated to their existing processes and workflows. This phenomenon, known as the anchoring effect, makes it challenging to rewire these deeply ingrained mental models, even when presented with superior alternatives.

Psychologist Dr. Bill Crawford said, “...unless we can change this internal wiring, all we will do is continue to go down these old “‘streets’ looking for a new address, but only continuing to see the same old scenery.”

The brain's propensity for cognitive ease – the tendency to favor familiar patterns and routines over those that require significant mental effort – further reinforces these established neural pathways.

Adopting new technologies necessitates a substantial investment of time and energy, a prospect that can be daunting for advisors juggling demanding workloads.

Fear of obsolescence

The most profound psychological barrier to technological adoption by financial advisors is the fear of obsolescence.

This fear refers to feelings of stress and anxiety caused by concerns your skills will no longer be relevant due to technology, specifically AI.

For many, their professional identity is inextricably linked to their role as trusted advisors, and the prospect of being replaced by AI-powered systems triggers existential dread. This fear is compounded by the rapid pace of technological change, which can foster a sense of being perpetually behind the curve, unable to keep up with the latest advancements.

The neuroscience of change resistance

Neuroscience offers valuable insights into the biological underpinnings of resistance to change. When faced with adopting new technologies, the brain’s amygdala – the region responsible for processing fear and emotional responses – can become overactive, instigating a fight-or-flight response. This physiological reaction can cloud rational decision-making and reinforce the tendency to cling to the familiar.

Don’t underestimate the role your emotions play in resisting change. An article in the Harvard Business Review noted that changes at work can be “emotionally intense,” leading to burnout. Some experts believe the level of stress induced by change can mimic that of people who are suffering from grief over the loss of a loved one.

The brain’s reward system, driven by dopamine release, is crucial in habit formation and change resistance. Established routines and processes have become deeply ingrained habits, reinforced by the dopamine hit associated with familiar tasks and successful outcomes. Disrupting these patterns can temporarily deprive these rewarding neurochemical signals, making change even more challenging.

The AI existential threat

As AI advances, the financial advisory industry faces an existential threat that could exacerbate these psychological and neurological barriers to change. AI-powered systems have the potential to automate many tasks traditionally performed by human advisors, from portfolio management to risk analysis and wealth planning. This prospect can awaken deep-seated fears of obsolescence and job insecurity, further entrenching resistance to these technologies.

However, the alternative – failing to adapt and embrace AI – could prove even more difficult for financial advisors. Those who cling to outdated methods and tools risk being left behind by more forward-thinking competitors who harness the power of AI to enhance their services and better meet clients’ evolving needs.

Overcome the barriers

A recent study attributed ambivalent feelings toward AI to these factors:

• A fear of the unknown;
• Seeing AI as cold and impersonal;
• A perception of AI as rigid;
• Seeing AI as too autonomous; and
• Being fearful of AI because it isn’t human.

To reduce ambivalence, the study recommended better education (i.e. explaining that AI can already perform “human-like” tasks like writing poetry and creating art and showing how machine learning gives AI the ability to learn and adapt) and giving humans more control over AI.

Addressing the psychological and neurological barriers to technological adoption requires a different approach.

Financial advisory firms must prioritize education and training programs that demystify new technologies and demonstrate their practical applications and benefits. By fostering a culture of continuous learning and adaptation, advisors can gradually rewire their neural pathways and overcome the anchoring effect.

Firms should use positive reinforcement and incentives to encourage the adoption of new technologies. Celebrating early adopters and highlighting their successes can harness the brain’s reward system to promote desired behaviors and facilitate lasting change.

Dan coaches evidence-based financial advisors on how to convert more prospects into clients. His digital marketing firm is a leading provider of SEO, website design, branding, content marketing, and video production services to financial advisors worldwide.

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