Changing mindsets

The practicality and psychology behind your client’s changing mindset

When it comes to thinking about the long term, there are multiple things that can influence our decision-making process. Such as our personality, life experiences and family’s opinions. But how does our outlook affect the way we think of our future? We’ve asked a range of experts to help us understand the practicality and psychology behind your client’s changing mindset.  


Why our mindset changes when we think long term

The way we view risk is deep rooted in who we are, our needs and values. While there may be other external influences, this plays a key part in how we approach our decisions. Dr Simon Moore, Behavioural Psychologist from The Innovation Bubble, explains “underlying needs around things like risk tolerance or risk aversion are quite stable. They run through you like a stick of rock, whether you're in your twenties, thirties, forties or fifties, it makes no difference. It's still very influential.”

Our attitude towards risk, whether we choose to focus on the finer details or look at the bigger picture, might stay the same throughout our lifetime. So, how is it possible that our mindset can change at different times?

While the way we view risk might not change, our life experiences can alter the risks we choose to focus on.

For example, our research shows that 1 in 3 people say that having children is an important life goal1. What we’ve discovered is that when these life-changing events happen, people’s focus will alter. Some will focus on the day-to-day priorities and will struggle to think of their longer-term goals.

While others will find themselves wanting to plan for their family’s future. Gifford Clay, Head of Individual Protection Sales, explains how immediate risk can change the way we think, “Over the past couple of years we’ve seen an increase in women taking out protection. The pandemic has actually brought the need for protection into focus." A global crisis creates uncertainty, which could result in clients thinking more about how they can protect their family’s future.

Dr Simon Moore explains further, “Some people are quite risk adverse - but perceived risks and the types of worries probably change as we navigate through life. It doesn’t mean we change in terms of being risk focused - the risks that worry us probably change.” This can also be seen through the different ‘gain or maintain’ stages we experience through our lives. Nick Flynn, Director of Retirement Income at Canada Life explains, “While clients are earning or have the ability to earn, attitudes and mindsets can be more adventurous and at the higher end of their personal risk appetite. As clients leave work or retire, we often see a preference for lower financial risks emerge.”

These are examples of how our experiences potentially change our mindset. And in an ever-changing world, this could alter our outlook on a frequent basis, making it difficult to focus on the long term.

How present challenges can affect your client’s future goals

Your client’s attitude towards risk might not be the only obstacle when it comes to encouraging them to think long term. As Darren Sage, Individual Protection Specialist at Canada Life says, “Having protection in place should be key to anyone’s financial resilience. But research shows that people would happily insure their mobile phones, pets and homes but are reluctant to insure themselves.” Responsibilities such as paying for our mortgage or pet insurance, are tangible elements of our day-to-day lives. So, it can be difficult to see past our present circumstances and look to the future. Especially when all we know is how we feel in the moment. For example, if your client has a young family and is struggling to make ends meet, they might not be able to imagine how this might change in the future.

If you client’s current mindset is to focus on the present and what they can control, how can you help them to think long-term?


The importance of building strong relationships

While it’s impossible to know what the future will look like in ten or fifteen years, setting achievable milestones could give your clients a goal to work towards. Nick Flynn explains “While milestones may appear a bit rigid, they’re simply a way to monitor the plan. Things may have gone well, so the timeline is slowed. Providing these milestone shows clients that you’re thinking about their long-term future.” Discussing milestones with your clients is an opportunity to understand their needs and, think about the flexible solutions they might need in the future.

Also, by building relationships with your clients earlier, you’ll be able to help them plan for their milestones more effectively.

Dr Simon Moore explains, “What happens a lot of the time is that a financial adviser may start talking about financial success/growth and security/provision. But there’s an area of emotionality required here; the adviser also needs to know about the person making the decision.”

Developing this emotional connection could help you create an open dialogue with your clients, enabling them to be honest about their concerns. It also allows you to be part of their journey and guide them during important life events as they unfold. Dr Simon Moore adds “If advisers can identify their client’s values, it allows them to have a stable and longer-term conversation with their clients because they’ll know what bothers them or what they should be saying. The advisers can then tailor the examples to suit that individual.”

It can even give you the opportunity to present a different solution. Alice Watson, Head of Marketing, Insurance, explains, “Some customers aren’t sure of the options available to them. By looking at their position holistically, you may be able to discuss a product which they hadn’t considered. For example, if they’re concerned that they can’t retire yet because their retirement income won’t fulfil the lifestyle they’re looking for, they may not have considered accessing the wealth stored up in their property to help them achieve it.”

Providing a personal experience for your clients could play an important role in your client-adviser relationship. Nick Flynn adds, “While attitudes to risk tools are really useful and a great guide, it’s the listening to the soft facts that make all the difference.”

However, Dr Simon Moore explains that this doesn’t need to be a dramatic shift in the relationship, but simply a way to keep revisiting the conversation with your clients. He explains “What we’re trying to do is have a conversation that stays stable throughout that relationship. We don't want to keep reinventing the wheel.”

Maintaining an open and honest approach with your clients might help you stretch existing conversations, to uncover their true needs. Nick Flynn adds, “Be an active adviser, rather than a reactive one. It may be as simple as a standard fund switch, or it may be a more significant restructure. Nothing in life stands still, neither should your advice.”

Top five key insights for advisers

  1. The way we view risk is deep-rooted in all of us, but it’s our life experiences that alter the risks we choose to focus on.
  2. People will take their current circumstances in things like finances and health and assume this will be the same in their future. This is called present bias.
  3. Creating honest and open conversations with clients could aid in identifying their values and needs.
  4. Discussing and setting milestones that are continuously reviewed with clients might help them look past their present bias and move their thoughts towards their long-term goals.
  5. Nothing in life stands still and neither should advice.

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