Here are a few of the traps your seniors may find themselves in without the benefit of your financial guidance and counsel and the ways to fix them. As you read each of these objections and concerns from your clients and prospects, let them know first what the concept is and, if possible, tell stories about other clients who have mistakenly believed similar notions and how you helped them.
The problem
"I want to keep my money where it is. If I sell now, I will ink those losses."
* This investment mistake is called "sunk cost fallacy"–throwing good money after bad.
These seniors believe their portfolio is still OK until they cash in. You can't make changes to the portfolio because that would realize your loss. The smart thing would be to take the money out and move it into a more sound investment. The U.S. government gave $70 billion to General Motors in 2008. GM asked for $30 billion more in March of 2009. Both the Bush and Obama administrations fell into this trap, believing GM was too big to fail. But the ensuing GM default was the biggest sunk cost mistake in American history. If GM had been restructured in September of 2008, it could have saved the company billions and taxpayers nearly $100 billion. Because of the inability to recognize this falacy, every citizen in America now owes $600 on behalf of one company.
The Fix
Ask your clients, if they didn't already own their investment, would they buy it again? That will bring them back to reality quickly.
The problem
I want to stay with my advisor (even though I have lost 42 percent of my life savings over the last year).
