Understanding emotions key to successful advice

From

Jacqui Henderson

Understanding some of the basic principles of behavioural science can help financial advisers to design better “advice experiences” for their clients. An experience that’s centred around a client’s goal achievement, according to a new white paper from Advice Intelligence (a.i.).

a.i.’s online goals-based advice (GBA) white paper aims to highlight the importance and benefits of providing goals-based advice.

“Goals are emotionally motivated, they are tangible and meaningful to clients. More so than outperforming markets by a percentage,” a.i. Founder & CEO Jacqui Henderson said.

“Financial planning, by definition, is a goals-based conversation, yet there is much room for improvement in the way the “old world” advice process has been designed.”

Goals-based technology can provide a clear link between the client’s goals, and how various advice strategies or investments can help improve their chances of achieving them.

“How many advisers can put a number as to how many goals they helped their clients to achieve? In the “old world” I’d say not many. In the “new world” advisers can say exactly. With goals front and centre, clients are constantly reminded of the ‘why’ that’s driving them, giving them a greater sense of control over their future,” Henderson said.

“According to our research, 70 per cent of Australians don’t know what their own life goals are, 25 per cent do, however only 5 per cent have them written down. This represents an exciting opportunity for advisers to help their clients to articulate these goals and set out a clear plan as to how they’re going to achieve them.”

The white paper details how behaviour influences the way a consumer receives and acts on financial advice, identifying that:

  • Emotional response drives human behavior. Significant Emotional Events (SEE) can dictate a persons relationship with money and how they make financial decisions.
  • The brain is wired to ‘seek rewards’ and ‘avoid pain’ or discomfort.
  • ‘Avoiding pain’ or discomfort works as a ‘de-motivator’, clients to return to the known, comfortable behaviour and thought patterns.
  • ‘Seeking rewards’ acts as a ‘pro-motivator’, driving clients to pursue positive feelings of reward and goal achievement.
  • Setting a clear mental picture of goals (see, hear or feel), means the ability to achieve them becomes more successful. The more abstract the goal, the less likely it will be achieved.
  • People empowered in their financial lives experience more joy, satisfaction and pride. Those disempowered are, overall, less happy.

In addition, a.i. has also launched their Goals Based Advice Podcast which brings insights and advice from industry experts. The first podcast of season 1 is available via the a.i. website and features Peita Diamantidis, co-founder of Caboodle Financial Services.

The podcast series will feature as part of a larger Goals Based Advice Academy (GBAA) that will launch soon. It is a platform for advisers to evolve their services and make better use of goals-based advice.

“While we understand that goals-based advice is by no means a new phenomenon, the unique technology means GBA can now be delivered, measured and positioned to deliver a far greater advice experience to consumers,” Ms Henderson said.

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