Understanding the family influence

Are clients more likely to discuss their financial planning with their loved ones?

From childhood, we’re taught that we should trust our families and not trust strangers. However, families can influence decision-making in financially unhealthy ways. Especially as people can pick up ‘rules of thumb' from their parents. But how deep does this influence run? And how does it impact your clients’ future focus?

We sat down with Dr Simon Moore, Behavioural Psychologist from We are IB*, to understand the psychology of family influence and what this means for advisers. Here’s what he thinks.

The psychology behind the family influence

Simon, can you explain the psychology behind the family influence on people when thinking about the future?

Often when people are parents, they’re thinking about their children as they are right now, with regards to money, protection and security, not what they or their children will think or need in the future. This is called present bias.

Along with this, the family can feed into this process and not necessarily verbally. They’ll have perceived opinions in their head, a situation where they’re trying to tick all the boxes. This may mean they’ll choose an outcome that's going to have less resistance or might go down better with family.

This all starts with good intentions, in the fact that people are obviously thinking about providing, protecting. But from the psychological point of view, people can misperceive what that future looks like, what they’re trying to achieve in the future and what the family members think that future should look like.

Are there any other psychological elements at play here?

Most families will have an elected or a self-appointed leader, I like to refer to them as an ‘elder’. When that person or others perceive them to be this ‘elder’ there's a lot of ego and status riding on that.

They can come across as being knowledgeable but as we know, people might say they are confident in making those decisions but that might not be the case.

Is there an emotional connection to their family that aids or hinders people when it comes to thinking about the future?

There's a positive connection and a more negative one.

The positive is that people do want to protect and provide a stable future for family members. However, let's not forget that some individuals just think about themselves. This is where the ego kicks in a little bit as well.

That’s one of the advantages of a financial adviser, they can diffuse the emotions within the family, as an objective middle person who the client knows doesn't have any emotional aims. All they're doing is providing the information and aiding the conversation. That is quite an advantage that we shouldn't undersell.

Sharing future goals with families

What happens psychologically when people share goals with family compared to sharing them with advisers?

I think there's a lot of safety behaviour going on here because there's less risk sharing these with family.

Imagine if a person talks to a financial adviser about something without their family knowing and then tells them they’ve seen an adviser. The reaction they’ll get could be a surprise and possibly a little bit of a chastise. People aren’t silly. They know this, and they've learned they've got to clear it with the so-called Family Committee first.

Speaking with family first also allows them to test the waters in terms of whether they would approve or reject that idea from the future planning point of view. And there is less risk in airing ideas with family, as they’ll tell them bluntly whether that's a bad idea, saving them from potential embarrassment with a financial adviser.

Around saving the client from embarrassing themselves with an adviser, can you explain this further and how advisers could help to remove this concern?

We must think there's potential embarrassment here through being judged. There's a confidence issue. People won't admit generally that they feel out of their depth or don't really know as much as what they're telling you. They know they want an element of control because of that.

If advisers can give them an element of perceived control, discussions will work better.

You mentioned that providing clients with an element of perceived control in discussions could aid advisers in conversations. Can you explain why?

It could help them have more relevant, engaging and persuasive conversations with their clients. People connect better with others when they see suggestions packaged up from an emotional point of view in terms of the family committee and dynamic.

It's not always just looking at things from a practical point of view and focusing on what financial security allows us to do. And what’s just as important, is that it allows us to have the element of time. Building conversations around the emotional aspects of what financial security can provide could help engage clients.

Along with this, advisers need to understand if the conversation they have with their clients is around negating risks that are associated with planning their future, or about how the adviser can help them do something new.

Top 3 insights to consider

1. People start with good intentions to provide for and protect their families, but they can misjudge what their future may look like based on their current circumstances.

2. People won't admit generally that they feel out of their depth or don't really know as much as what they're telling you. They know they want an element of control because of that.

3. Building conversations around the emotional aspects of what financial security can provide could help engage clients.

*We’ve partnered with We are IB, leading experts in behavioural psychology, to understand how clients think and the barriers this might cause when it comes to thinking about the future.