Excerpt from the book "Client Engagement For Financial Advisors"

Of course for more....you can access the complete guide at the following link:

Click to view Client Engagement for Financial Advisors

There has been much research on why people seem unable to make financial decisions in their best interests with some of the acknowledged causes being; an inability to cope with complexity, choice confusion, herd mentality, social proof, an inability to look forward and to forward plan, a lack of understanding of basic and fundamental concepts like compound interest and cash-flow management, genetics (yes I’m serious), behavioural fundamentals and personality including self-control, and sadly but unfortunately a reality, that some people through socio-economic circumstances, background, upbringing and situation influences are trapped in a “just getting by” whirlpool.

Is it any wonder therefore, that despite your brilliant proposal, that a response of “I need to think about it” is received?  That people do anything at all to move forward is somewhat of a miracle!

What are some of the tools and techniques that professional advisors can employ to assist in this process of decision making for a client?  And importantly to set a positive context in which people can make decisions.  Work by Klement and Miranda (2012) attempted to solve for this very equation.[i]  Predominantly they looked to provide advisors tools to accurately assess an investors risk preferences to help therefore in reaching the goals of the investor but at an appropriate level of risk. 

People are in fact disengaged with advice because of a complex interaction of: behaviour, socio-cultural influences, biology and cognitive skills.  Therefore, as we have stated, it is the way you understand and manage your prospects and their emotional responses that will determine their willingness to engage with you, to make change.  The disengagement, with ones’ financial affairs, that we have explored is not a deliberate choice.  No-one wakes up in the morning or has as a daily mantra “I am deliberately avoiding dealing with my financial past, present and future”. 

---

[i] Klement, J., & Miranda, R. E. (2012). Kicking the habit: How experience determines financial risk preferences. The Journal of Wealth Management, 15(2), 10-25,7. Retrieved from https://search-proquest-com.ezproxy.lib.swin.edu.au/docview/1034599867?accountid=14205v