Making clients happier

For financial professionals only

Chris Budd, author of The Financial Wellbeing Book and Chairman of the Initiative for Financial Wellbeing, will be Patrick Ingram’s first guest on our forthcoming webinar series, Let’s talk retirement.

Here, Chris explains how understanding human behaviour is key to wellbeing – and producing better financial outcomes for your clients.

Have you ever had a client who frustrated you?

Perhaps they would not listen to your advice, preferring instead to believe something they read the newspaper.

Maybe they failed to see the long-term impact of a short-term decision, such as skipping pension contributions.

Or maybe you struggled to get an older client to spend money on themselves, even when your cashflow demonstrates that they already have enough.

Behavioural finance is the study of the behavioural biases that we all have within us. Confirmation bias, present bias and the endowment effect are the three biases behind the examples above.

Much of the writing about behavioural finance, however, focuses on how we can use awareness of these biases to improve investment returns.

To me, this seems to completely miss the point of money. To study cognitive biases in order to beat the markets feels like learning to play the piano in order to get a job in a piano bar.

Surely the point of financial advice is to make clients happier. Not only is this a much more enjoyable way of doing the job, but it breeds client loyalty and strengthens your practice.

To help your clients to get better outcomes by understanding their behaviours does, however, require more than just an understanding of behavioural finance. It means applying basic coaching skills and wellbeing theory to the individual biases and making more sense of money for your clients.

By Chris Budd, The Eternal Business Consultancy

This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.  

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