Recent evidence shows that apps and social media are being used more frequently as a resource to be informed on financial topics. Such platforms can be engaging and accessible for all regardless of age, wealth and interests.
Making the information available when the client needs it – for example, providing education about volatility in periods of market uncertainty – can help the client feel better prepared to cope.
Encourage autonomy
Clients should have a sense of agency over their investment decisions. Low agency can lead to many unwanted behaviours, from inertia and low confidence to acting impulsively.
If clients do not feel they can act freely, and therefore do not have autonomy, or feel that they do not have the capacity to influence their own thoughts and behaviours (agency), then they are more likely to obsess over details, or worry excessively.
Providing clients with autonomy increases their motivation to engage with their finances.
Technology that raises attention to the realities of life positively affects agency levels. Using interactive and intuitive tools allows clients to feel competent with managing their finances and helps them take the required steps to meet their ultimate goals.
The adviser’s support can also help here. When it is obvious that we are working alongside someone on a complex task, then our interest and motivation in the activity increases. We are more persistent in completing the task, find it more interesting and enjoyable, are more engrossed, and perform better.
Through cash flow planning, for example, goals and objectives are discussed together to create a financial plan.
These are broken down into smaller achievable targets so that clients are provided with realistic goals they can work to.
As clients meet their goals, whether these are what they must do, would like to do and/or dream of doing, they increase intrinsic motivation and build confidence in their abilities to manage their finances.
Foster connection with their future self
We struggle to connect with and envision our future selves as we perceive a psychological distance between our present situation and the benefits of acting for future rewards.
We tend to discount future pains, pleasures and needs, overvaluing rewards we can obtain today at the expense of future returns.
Failing to discuss objectives and expectations, or setting unrealistic ones, as previously mentioned, ultimately sets your clients up for failure and regret when they experience unexpected performance.
Their innate desire to seek instant gratification is reinforced, discouraging perseverance and holding a long-term view of investing.
Research shows that fostering greater connectedness with our future selves can have positive impacts on retirement savings as well as our overall health and wellbeing. The issue is that we often get caught up in the pleasures of today.
