But most financial professionals* receive very little training in client psychology, and in the related art and science of giving advice. Advice that is timely, palatable, and easy for clients to understand. Advice that is custom-designed not only to be technically sound, but also to be ‘just right’ in terms of the client’s ability to receive and act upon it.
This book fills the gap in that training. I want you to be able to give financial advice in such a way that three things happen:
1. your great recommendations are followed by your clients,
2. your clients’ well-being is maximized as a result, and
3. you experience a massive boost in your career success and satisfaction.
Throughout this book, I will be sharing evidence-based, practical tips with you. These are strategies that have emerged from decades of research into two intriguing questions. The first: What makes it so hard for people to do the right things for their well-being? The second: What can be done to help them make lasting, meaningful changes in their behaviour?
Most of the earliest studies in this regard were targeted at health-related behaviours (things like quitting smoking or taking medication properly). The scope of the studies has expanded greatly since then. Broader applications of research findings have had a transformative impact on fields as varied as environmental protection and elite-level sports performance. It is high time for such a transformation to take place within the financial professions.
For the past decade, I have been adapting these strategies to help bring about lasting, meaningful change in the lives of the clients I see in my own work as a financial psychologist and executive coach. The approaches have been further field-tested and tweaked by the financial professionals I consult with around the globe. I am confident that you, like them, will find that these easy-to-implement strategies make a world of difference in your clients’ willingness and ability to follow your advice.
By the end of this book, you will know how to give advice that sticks. And perhaps – just perhaps – you might also find that you have been able to address some of your own areas of stubborn resistance to change. So read on to find out what an agitated professor and a wounded lumberjack have in common; how empathy, confidence, and blueberries can all be dangerous; and what my mother being branded a tart has to do with anything at all.
Two kinds of expertise are needed
Throughout this book, I will be making a distinction between the technical and the personal sides of advising. The technical side has to do with the domain-specific financial knowledge that you are examined upon throughout your education and credentialing journey (e.g. taxation, investment strategies, cash flow projections). The personal side has to do with client psychology and life situation (e.g. goals, abilities, energy level, outlook, family dynamics). ‘Both sides are equally complex and equally important,’ maintains Susan Bradley, founder of the Sudden Money® Institute and a thought leader in the financial advising profession. Regrettably, most credentialing programmes in the financial professions seem to operate on the assumption that, once the technical stuff is mastered, the so-called ‘soft skills’ will take care of themselves.
When it comes to clients not following through with recommendations, it’s rarely because the advisor is technically unskilled or incorrect. Instead, it’s usually because the personal side of things has been neglected or misread. If you’ve been working with people and their money for any length of time, you will likely have come to the conclusion that the technical side of advising is comparatively easy. It’s the ‘soft’ side that’s the hard side!
Many financial service professionals have realized they need a different kind of training, one that addresses human psychology. Organizations such as the Kinder Institute, Money Quotient, Sudden Money® Institute, and Financial Recovery Institute have spearheaded the delivery of excellent specialized training in this regard. Interdisciplinary collaboratives and think tanks such as the Purposeful Planning Institute and the Nazrudin Project have offered further opportunities for a broad range of professionals to come together, reflect on money’s meaning and effects, and influence the evolution of their respective disciplines. Advice that Sticks merges the teachings of these pioneering financial deep thinkers with the scientific literature on non-adherence and behaviour change.
Need, opportunity and gift
This book is for any advisor who understands the NEED, the OPPORTUNITY, and the GIFT that exist with respect to delivering advice more skilfully.
Level 1: Need
You know the irony of this situation as well as I do. In an era when financial guidance has never been easier to obtain, the citizenry of the developed world has dismal savings levels and record amounts of indebtedness. Yet none of the branches of the financial services industry seem to be taking into account the fundamental complexity of human psychology. They just keep on telling people the same old messages about what they should be doing, as though more telling will result in more uptake.
The evidence by now is pretty clear that this is not a knowledge problem; it’s an implementation problem. It’s not unlike knowing that apples are better for us than chips, even as we reach into the bag for more salty, fatty yumminess. What we need instead of more information is more help in bridging the gap between correct knowledge and effective action.
This need exists, not just for the betterment of our clients’ lives, but also for the future of the various financial professions. Huge shake-ups are taking place industry-wide, but especially within the specific domain of financial planning. Faceless, interchangeable robo-advisors are taking on a bigger share of the market, and mature advisory firms are seeing slowing rates of client acquisition. The financial advising profession is having trouble attracting new recruits.
Across the broader financial services industry (which includes banks, insurance companies, brokerages, investment funds, and credit card companies), unsavoury and hidden practices are coming to the attention of the public. Legislative changes are being enacted worldwide that will increase transparency with respect to such things as disclosure of fees and debt servicing costs. These numbers are now staring consumers in the face with every credit card bill or investment statement that arrives in the mailbox. In response, consumers are becoming more assertive with service providers, insisting that they prove their worth, lower their fees, or lose the business. As a financial services professional, you need to focus on adding value to the advising relationship itself, as the profit margins for financial products or technical expertise alone will continue to be squeezed.
Level 2: Opportunity
Hidden within any threat or challenge you might be facing are the seeds of opportunity:
If you have been losing clients or assets under management, you have an opportunity to understand and reverse that trend.
If you have been longing to develop a stable, enthusiastic roster of clients that you can serve for life, there is an opportunity for you to develop expertise in client psychology that will be a strong differentiator from your competitors.
If you are curious about the burgeoning fields of neuroeconomics, positive psychology, and behavioural economics, there is an opportunity to capitalize on the exploding body of knowledge that is emerging to help shape desired behaviour change.
By embracing the challenge, you can base your work on a more complex, nuanced understanding of what it is to be and to advise a human investor and consumer. Odds are high that you will also end up lowering your own stress level and that of your team, because you won’t constantly be stymied and frustrated by clients who are not following through.
Level 3: Gift
Much has been written about the different attitudes people hold towards their work. Some view what they do merely