3 Ways Behavioral Finance Can Add Value


Behavioral finance is a strange term, but as it is widely accepted and understood other parts of the world, let’s stick with the tag meantime.

Creating behaviourally smart financial advisers isn’t easy for two reasons;

  1. Advisers have to want to be behaviorally smart – this may not always be the case, believe me on this one. I’ve met some advisers who don’t want to know more about their prospect/client – don’t ask, I can’t explain. I step away from such individuals very slowly and just move on.
  2. Advisers ultimately have to make themselves behaviourally smart – me, or anyone else like me, can only facilitate their becoming so, i.e. point them in the right direction, supply some tools to assist, and stand well back. Sure, periodic guidance is provided, but in the end, the motivation comes from within.

However, assuming both reasons can be accommodated, there are three ways that following this course of action will be beneficial.

Firstly, the concept of ‘behaviourally smart’ embraces getting the client to “engaged” level with the adviser. Not “satisfied”, not even “loyal” - because research suggests that these clients don’t do what “engaged” clients do consistently – that is, provide referrals. In fact, the research confirms that clients who are engaged volunteer leads – how smart is that, and is that added value?

Secondly, at some stage – now or in the future – if a regulator knocks on the adviser’s door and asks why a particular course of action was recommended, would showing said regulator an in-depth analysis of the client’s financial DNA improve the chances of satisfying the regulator’s enquiry? Is accounting for compliance – existing and potential – added value?

Thirdly, if, sometime in the future, Warren Buffet or some other eager buyer wants to buy your practice/ business/company, does providing said buyer with a unique ‘key’ to each client in your CRM system, detailing how to maintain every client relationship they propose taking over, add value to the transaction? I’d suggest it does, because if the buyer has no inkling to the maintenance of the client relationships, he/she will be invoking retention clause conditions in a New York minute (which is not very long at all, for those who haven’t visited the Big Apple)

While Communications DNA and Financial DNA both have practical operational application for revenue streams, their strategic value to your practice/business/ company is enormous.

Does your ‘know-your-client’ process include a financial DNA analysis or does it stop at the client’s middle name and bank balance?

If it’s the former, well done; if it’s the latter, get in touch – quickly!




The Laird