Good advice depends on an adviser having a deep knowledge of the regulatory, technical and product landscape.
There’s little doubt that the better an adviser’s expertise, the sounder and more informed their recommendations.
But thanks to influential insights from behavioural psychology, we now know that no matter how sound the advice, clients often make crucial financial decisions based on emotions rather than financial rationality.
We can add to this an array of unconscious biases that persistently lead to less-than-optimal money decisions, especially when long-term thinking is required.
For instance, clients may overestimate their future security (optimism bias), be overly cautious when thinking about risk (loss aversion), or prioritise present benefits over long-term outcomes (present bias). The list goes on.
The consumer principle
Taking the FCA’s Consumer Principle to heart, it’s clear that good client outcomes require a broader understanding of what skills an adviser needs to best serve a client’s interests.
So, we partnered with We are IB, leaders in behavioural psychology, to conduct research into the experiences of both clients and advisers.
We discovered that many advisers are comfortable talking about emotionally charged issues with their clients, and do so on a regular basis.
But our research also stressed that to achieve good client outcomes, there’s immense value in advisers being able to accomplish two essential goals.
The first is identifying and empathising with the emotions driving client decisions. The second is presenting recommendations in a way that takes these emotions and biases into account, working with them rather than against them.
The art of deeper conversations
The key is having deeper, more meaningful client conversations within relationships built on empathy and trust. If there’s one thing to remember, it may be just this.
And while it might appear easy enough, engaging in in-depth discussions requires preparation, practice and on-going work.
Our research also found that many training materials focusing on relationship building do so in terms of it being a skill for business development.
This is why we created HumanSense, a truly soft skills-centred resource providing actionable insights and practical tools for advisers.
The value of empathy as a professional skill
Certain topics (like equity release where a family home is involved) may trigger fear and anxiety. Or clients may feel uncomfortable in a conversation involving confusing or unfamiliar financial terms.
Clients may resist having substantive conversations for a variety of reasons.
Through emotional empathy, though, an adviser will be better placed to understand a client’s individual perspective, recognise why they feel a certain way, and encourage them to share the thoughts and feelings that may make them feel vulnerable.
Connecting with a client in this way is important because along with being a decisive influence on long-term choices, an entire range of emotions may also prevent clients from sharing critical information.
