Connecting with your clients
How understanding cognitive barriers can help you achieve better outcomes.
Understanding behavioural bias and motivational needs
How does this impact your client’s long-term perspective?
Defining behavioural biases
Here are some of the biases that your clients might be experiencing.
Optimism bias – This is the tendency to have a rose-tinted view of the world. If your clients have optimism bias, they might believe that things will always work out for the best and struggle to see where the future pitfalls may be.
What does this mean? Clients might overestimate their returns and underestimate how much money they’ll need in the future.
Present bias – This is the habit of focusing on the here and now, as well as over-valuing immediate rewards over long-term benefits. If your clients have present bias, they might struggle to see past their present circumstances. Good or bad.
What does this mean? This can lead to overspending and over borrowing.
Anchoring –This is a powerful psychological concept that helps us to make decisions by using a single piece of information as a reference point. However, this can cause unhelpful distortions for clients, as the information they’re using as a benchmark for their decisions might not be helpful.
What does this mean? Clients might have an unrealistic view of their future because of the information or referenced they’ve anchored to.
Pain of paying – The same neural pathways in our brains that are associated with feelings of pain are involved when we pay with money. For some clients, it might hurt to pay.
What does this mean? The pain of paying can be a barrier to long-term saving.
Loss aversion – This is the tendency to prefer avoiding a loss rather than acquire an equal gain.
What does this mean? Loss aversion can lead to hesitancy to take a risk when investing.
Three motivational traits to look out for
Your client’s motivational traits can impact their attitude to risk when it comes to planning long term. And they may fall in to one of three categories - the Controller, Sociable and Explorer.
The Controller
I want my adviser to provide me with the facts and figures to allow me to feel in control.
Controllers seek clarity, order and stability. They need to feel that they are right, which they achieve by being in control of knowledge.
What do Controllers need?
They require more detail and a broader understanding of the product itself to make them feel in control.
What do they look for in financial decision making?
They’re driven by their need for control and manage risk by acquiring information.
“I’m very aware of what money goes where and when, and what bills are due out. I'm very careful about shopping around for deals for gas and electricity. I try to get the best deal I can on everything.”
Client
The Sociable
I want reassurance that I am doing what others would do and to delegate the thinking to my adviser.
Sociables need to belong to an in-group and need the approval and validation of others.
What do Sociables need?
Sociables may need something to relate to. So, framing the product around what others would do in a similar situation and leaning into the personal authority of the adviser could help.
What do they look for in financial decision making?
They’re driven by reassurance and personal connection. They manage risk through social proof.
“I need Dan to be realistic and say, no, it's not going to happen. Dan knows me well enough now to know that I'm cautious. I want someone who I feel I can trust.”
Client
The Explorer
I want financial freedom, my adviser helps me to achieve this
Explorers are outward looking and open to new experiences.
What do Explorers need?
Explorers have a need for novel experiences and the independence to enjoy them. They like to discover new things and be stimulated. Explorers like to challenge boundaries and deviate from the ‘status quo’ if it brings them new experiences - due to their fundamental need for enjoyment. They are curious and inquisitive and have a preference for big new ideas rather than details.
What do they look for in financial decision making?
They want to know what opportunities will help them to live life to the fullest. They’re not as concerned with the finer details.
How to identify your client’s core needs
The Controller and Sociable are critical when it comes to risk management. So, asking the right questions might help you manage your client’s sense of risk and uncertainty around products.
For example, asking your clients if they would prefer you to go through all the details or provide a summary, can give you an indication of their motivational needs.
A Controller, for example, will be more interested in understanding all the details and will want to spend some time with it on their own. Whereas a Sociable will be happy with a summary and want to delegate to their adviser. They’ll also be looking for more assurance on their decision and will want to know what most people would do in their situation.
So, whether your clients are a Controller, Sociable, Explorer or are experiencing a behavioural bias, understanding their needs can aid in providing holistic financial solutions.
Keep giving advice worth living, explore the next Human Sense articles
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How do your clients’ emotions impact their decisions?
Evolving the soft facts
Does the industry set up advisers to engage more deeply?