Managing behaviour...

If people ever ask me what I do for a living and I reply, ‘I’m a financial planner’, I can see from their reaction that their view of financial planning differs slightly from my own.

I understand that. The perception of financial advisers/planners has been influenced by any number of historical miss-selling scandals, recent market turmoil from 2008 and numerous media stories surrounding crashes/crisis/greed etc.

However, in 2018 the reality is somewhat different. There are a large number of firms doing really excellent work with many people and families, helping them to lead happier lives. These firms are sharing best practises with one another and, as a community of professionals, we’re growing and working on changing the landscape and how financial planners are seen.

Technological advances have resulted in a lot of the paperwork and back office work systems being automated, improving efficiencies and outcomes. This leaves me more time to help manage people or, more specifically, people’s behaviour - which is where the real work and the real value lies.

Humans behaving badly

Without delving into behavioural finance too deeply, the management of people and their decision-making is far and away the most important aspect to my job.

Humans have around 160 cognitive biases that are ingrained in our thinking, into our DNA and have been for centuries or even millennia. I just finished the book ‘Sapiens’ by Yuval Harari which is a brief history of humankind and, for someone who isn’t a history buff, it was an amazing read.

I’ll write about a few of the most common biases in the weeks to come but for now, I’ll give you an example to relate to from Neil Bage who is a consumer behaviour expert:


How we help

When building a financial plan for someone, it's my job to try to identify if there are certain biases which could be affecting their choices. We can then talk through them, to ensure that the decisions we make together are rational and based on their objectives.

I really enjoy this ‘behaviour management’ element of my job. I love to sit and listen to people and to provide clarity around their thoughts. I’m used as a sounding board to validate decisions, to provide perspective, foresight and to keep them on the path they’ve told me they’d like to stay on.

As we all know, not everything in life always turns out the way we expect it to!  The only certainty with any financial plan is that it’s going to evolve. It’s my job to ensure that biases and behaviours are kept in check at every stage of the evolution, and that the plan continues to support the client’s goals.

Trust and honesty

In order to be able to show a client how to distinguish a true objective from a bias influence – they need to have trust in me. I can’t help someone to develop their way of thinking if they don’t believe in what I’m saying.

The two biggest responsibilities I hold are being trustworthy and being honest. People must feel comfortable and willing to trust that I have their best interests at heart and feel confident I’m being truthful. Trust can take a long time to gain but can be quickly broken, so it’s a responsibility I take very seriously in all situations.

Of course, they are times when I need to apply diplomacy in how I communicate honesty with people -  but honestly is the only policy when people trust you.

Next time someone asks me what I do for a living, I think I might try saying that ‘I manage people’s behaviour around their finances and help them make good decisions’.

It will be interesting to see if that generates a different reaction!