Choice overload and Financial Planning: Why more choices are overwhelming and what to do about it.

Ever feel like you're drowning in decisions? You're not alone—everyone makes about 35,000 choices every day! From hitting snooze on your alarm to choosing between fries or a side salad (fries, obviously), we're all navigating a minefield of micro-decisions. Ordering at Starbucks alone feels like an infinite back-and-forth of options. Incidentally, thanks to social media, it appears as if the longest possible Starbucks order is:

?

“Double Ristretto Venti Nonfat Organic Chocolate Brownie Frappuccino Extra Hot with Foam and Whipped Cream Upside Down Double Blended…in an extra-large cup.”

?

(I cannot verify or even define all the above. Good luck to the person waiting in-line behind this order).

?

In a world brimming with options, from supermarket aisles to streaming services to dating apps, it’s tempting to think more choices equal greater happiness. Yet, the paradox of choice reveals a surprising twist: too many options can lead to anxiety, indecision, and dissatisfaction (Schwartz, 2004).

?

This is choice overload—a modern dilemma where the promise of freedom and variety backfires, leaving many overwhelmed and regretful. Understanding and addressing choice overload is key to finding true satisfaction and making decisions with confidence. Some symptoms of choice overload:

?

1. Decision Paralysis: When people are faced with too many options, they may find it difficult to make any decision at all. This can lead to procrastination or avoidance of the decision-making process. This usually happens when there is such nuance between options and not necessarily a clear option.

?

2. Increased Anxiety: More choices can increase cognitive load and stress, making the decision-making process more overwhelming and less enjoyable.

?

3. Regret and Dissatisfaction: Even after deciding, individuals may experience regret or wonder if they made the best choice.

?

Choice overload and financial planning

?

In financial planning, it's no wonder clients often feel overwhelmed. When faced with countless investment options, insurance plans, retirement strategies, and sometimes stressful conversations about goals and estate planning, decision fatigue can set-in, making it harder to make well-informed choices.

?

The firms and advisors we work often do not consider how they are presenting choices to their clients. Presenting the options poorly can lead to them dragging their feet, making poor decisions, ghosting you, and ultimately, frustration for both the client and the advisor.

?

What to do:

?

1. Limit Options: Present a curated selection of the most relevant and beneficial choices to the client, avoiding overwhelming them with too many possibilities. Sometimes called choice architecture, you can focus the client’s attention on options that will be most helpful in getting them to meet their goals. A good cue is “clients in similar circumstances sometimes select…”

?

2. Simplify Information: Use clear, concise explanations and visual aids like charts or infographics to break down complex information into easily understandable parts. Do you know your client’s learning style?

?

3. Prioritize Decisions: Help clients focus on the most critical decisions first, tackling less important choices later. This step-by-step approach can make the process feel more manageable. If they are feeling anxiety, celebrate victories and say things like, “we are halfway through it…”

?

Nudges are great, too. But that’s too much information for the newsletter. Invite me to visit and we can talk nudges!

?

Journaling Decisions

?

Researchers at the University of Michigan found that writing down choices can make one more confident and unbiased. In their study, 100 college students had to decide what to do during a hypothetical disease outbreak (yeah, a pre-Covid study).

?

Subjects who wrote down their decisions felt surer of themselves and made less biased choices, even when the researchers tried to trick them by framing bad options in a positive light and good options in a negative light (Sieck & Yates, 2001).

?

Significant implications for financial planning. Asking clients to document their options can lead to:

?

1. Increased Confidence: Clients who write down their financial decisions may feel more confident in their choices.

2. Reduced Bias: Written deliberation can help clients spot biases and avoid framing effects, leading to more balanced decisions, particularly if they document their decision and revisit it a day or two later.

3. Less regret: Encouraging clients to document their decision-making process can result in more equitable and well-considered financial plans. Most importantly, if they experience regret or FOMO down the road, they can revisit what they documented to remind themselves of why they made the decisions they made in the first place.

?

So, next time you’re paralyzed in the cereal aisle, wondering if you should commit to the high-fiber flakes or the chocolatey puffs, take a deep breath. Remember, it’s not about the sheer number of choices but how you handle them.

?

And if all else fails, just grab a box of whatever your mom used to buy – she knew what she was doing. After all, she survived raising you, didn't she?

?

Visit me at www.CharlesChaffin.com for more or visit us to learn about our Financial Psychology advisor programs, workshops, and consulting at www.PsychologyofFinancialPlanning.com.

?

References

Sieck, W., & Yates, F. (2001). Exposition effects on decision making: The role of confidence. Journal of Behavioral Decision Making, 14(2), 107-127. https://doi.org/10.1002/bdm.380

?

Schwartz, B. (2004). The paradox of choice: Why more is less. Harper Perennial.

?