Blue Chip Issue 96

BLUECHIPCLIENT

BLUECHIPCLIENT ENGAGEMENT | Behavioural financeA Conversation for Perspective: thefirst step in influencing client decisionsMany factors influence clients’ perspectives when they make decisions.Akey concept from Stephen Covey’s book, The 7 Habitsof Highly Effective People is that what you “see”determines what you “do”, and what you “do”determines what you “get”. Hesuggests that our perspective determinesour reality. When it comes to financialplanning, I believe this to be true, andif so, the challenge to influence whatclients “do” begins with influencing theirperspective on money and life.Arguably social pressure is the mostinfluential. Clients may bring questionsfrom the braai, or from the latest hype on X, Instagramor Facebook. The hype could be about crypto, Trump,Afrikaner refugees or AI. Whatever the source, invariablyWe often don’tknow what wedon’t know.this leads clients to fall foul of the “narrow framing”bias. We focus narrowly on a particular issue/problem andthen magnify its influence on our life, our money or both.For example, you may have a clientinvested in a range of funds that offerthem diversification from an assetallocation and fund manager perspective.Social media hypes the poor performanceof one of the funds in which the client isinvested. The recency bias means the clientwill want to address what social media says,and by falling foul of the narrow-framingbias, the client wants to change that particular element oftheir portfolio. If you want to shift the client’s perspective,how do you do it?68www.bluechipdigital.co.za

CLIENT ENGAGEMENT | Behavioural financeBLUECHIPOne way is to recognise thatwe can have different typesof conversations with clients.Charles Duhigg, author ofSupercommunicators, suggests thatthe type of conversation we haveshould depend on the needs ofthe person we are talking to. Ashe puts it, does the person wantto be “helped, hugged or heard”?Each need requires a different typeof conversation.The key is to helpthe client developan awareness oftheir perspective.It seems the client in the aboveexample wants help to change theirportfolio. But it may be that theyjust want to be heard. Either way,to influence what the client does,I believe the starting point is tohave a conversation which exploresthe client’s perspective. I call this a“Conversation for Perspective” whichallows the client to reflect on andexplore their own perspective onthe dilemma/issue that they arebringing to the financial planner. Inother words, it is a conversation abouthow they are “seeing” their concern.What is really influencing them to fallfoul of the narrow-framing bias?The key here is to help the clientdevelop an awareness of theirperspective. We often don’t knowwhat we don’t know. By focusingthe conversation on the client with curiousopen-ended questions, a financial plannercan help a client become aware of anylimiting beliefs or assumptions they aremaking with respect to their issue ordilemma, in this instance, the poorperformance of a fund.Rather than focusing on the fund,the key would be to determine whatabout this is troubling for the client. In this way you can getsome insight into the perspective of the client and exploretheir relationship with their sources of information, be theyfriend, family or social media. Only once you have greaterinsight into what is driving the client’s perspective, wouldit be appropriate to take the next step and try to influencetheir perspective. If a client doesn’t feel heard, no amount offact-correcting will influence them to shift from their narrowframingbias.Most often conversations about money and investing focuson the markets, products and investments. This is where financialplanners have expertise, where they can show the client theirauthority. But it is also the place where the biases of the financialplanner and their clients can easily trip them up. Just likethe client, you may be tempted to focus too narrowly, gettingcaught up in discussing the pros and cons of the fund, ratherthan the overall portfolio, or more importantly, the client’s life.I believe the most effective way for you to get a client tomake the most appropriate decisions about their money andtheir life is to bring the conversation back to the client’s life. Ifyou can help clients to use their own life as the key referencepoint for their perspective, this will be the most effectivenudge to inform their decisions. Getting a client to considerthe perspective of “What has changed in my life?” is a farmore powerful influence on their decision-making, than“What’s happened to the fund I’m invested in?”This is easier said than done. It requires courage for a financialplanner to temporarily abandon their hard-earned status asan expert in all things financial and investment related. Itrequires courage and skill for financial planners to get clients toreflect on their perspective, how they are seeing their concernor dilemma, rather than defaulting to sharing expert insightsand opinions.Having a “Conversation for Perspective” can help clientsimprove their understanding of their situation and get newinsights into themselves and the problems ordilemmas they may be facing. It is often a spacewhere the curiosity of a financial planner helps theclient unpack their assumptions and beliefs orcritically consider what information they are usingto inform their perspective. Enabling a client toshift their perspective is the first step in helpingthem make sound decisions about their moneyand life. After all, as Stephen Covey says, how yourclient sees things will determine what they do.And what they do will determine the financial andlife outcomes they get.Rob Macdonald,Independent Consultant69