Advice for Advisors: Why an Ounce of Prevention Is Worth 300,000,000 Doses of Cure

One of the big lessons of the COVID-19 pandemic is how unprepared we were for coping with a novel coronavirus. As I write this in early October, we are still struggling to understand what we should be doing and how best to tackle this challenge. Confusion swirls around news reports, and I am struck by how much this reflects the conundrum that financial advisors face: Why is it so hard to get clients to take preventative action to protect themselves from real and measurable risks?

At the AllianceBernstein Advisor Institute, we publish a number of checklists designed to help advisors alert clients to the wide range of investment-management and wealth-management issues that they must deal with once they accumulate wealth. Some address concerns common to many clients, like those associated with planning for retirement (The Preretirement Preparedness Checklist), while others address more specific life issues (such as The Premarital Preparedness Checklist). We even have a new resource to help uniquely successful clients cope with the challenges of the COVID-19 pandemic (The Financial Uncertainty Preparedness Checklist). In every case, the checklists focus on preventing problems before they happen.

As I’ve observed advisors and clients, I’ve noticed that both groups have trouble focusing on prevention. Instead, client engagements tend to narrow frame around a few key investment-management issues in the portfolio and seek solutions like better performance or lower price. Narrow framing is the tendency of humans to focus on a few pieces of information while editing out many other important parts of the problem. Behavioral science teaches that our brains will focus on a solution to what we see, rather than addressing the other concerns that are invisible.

Across many hundreds of relationships, I’ve watched advisors struggle to get clients to prevent problems in their portfolios and in their larger financial plans rather than fix problems after they happen. People seem to prefer to be reactive to events rather than proactive about their lives. This is so common that I think it deserves a closer look. Let’s use the COVID-19 pandemic as a way to understand this pattern in human decision-making.