A Nudge In The Right Direction

A Nudge In The Right Direction

When I did the #CFAProgram, Level 1 was a breeze, Level 2 was a nightmare, and Level 3 was an induction to the real world.

There was one topic in Level 3 that got my attention: Behavioral Finance.

Long story short, I like how people think. And I like understanding the "Why?" in life. #BehavioralFinance made me understand why economic participants do what they do.

In my early years as a #financialadvisor, I noticed people didn't like hearing my advice. It frustrated me SO much because, "Why won't you listen?!"

It was only later in my #career that 2 things hit me:

1. "No one likes being told what to do". Telling people they should change their lifestyle will be met with stubbornness. "Why are you telling me that I make poor lifestyle choices? I am offended, so I won't listen". Which leads to...

2. Human beings are #emotional.

These two things made me understand people on a deeper level.

This subsequently ties to the #NudgeTheory. The purpose behind the theory is to make big and small interventions, aimed at making people act in their self interest. Therefore, instead of telling people what to do, gently push them to SEE why their way is unhealthy and how your way will rectify the current problems they face.

Most times, they know what they are doing is wrong, but change is hard, so it is up to you, their advisor, to gently guide them and not violently shake them. If they get daunted at the huge #change they need to make, they will throw their hands up in the air and continue that habit.

Bite sized changes + the power of compounding = great results.

Moreover, in behavioral finance, it is advised that when trying to deal with #emotionalbiases, you should try and adapt to it.

Now this is important because I look at it like this:

If someone likes having fun and it's killing their finances, telling them to stop having fun will make them want to pour water in your face. If, however, you tell them they can still make sound financial decisions AND still have fun, they will most likely give you a hug.

And this is why I reckon people don't like receiving financial advice. Because they want to remain in their habits. And while they know it's bad, as their financial doctor, it's up to you to try and assure them that they can do some of the things they like to do while still leading a healthy financial lifestyle.

So #adapt more, and #nudge people in the right direction.

If you'd like to learn more about how you can find a balance between your finances and your lifestyle, book a consultation today!

Mercutio Kgaodi

Finance Professional

2 年

Straight up ! incremental change beats being radical.

Mo Shehu

CEO @ Column | LinkedIn for Leaders

2 年

“Financial doctor” is a great metaphor because it forces advisors to approach their practice just like a medical doctor would - without shaming or judgement, and with empathy and encouragement.

Sethunya Masebe, MBA, PRINCE2

Supply Chain Professional PRINCE2 Practitioner

2 年

Indeed - ever seen how someone who is about to bath or wash dishes acts like when you tell them to do the thing they were about to do? Resist - especially the older we become because like you say its not that we dont know what is the right thing to do. Its also important to highlight the adage “its not what you know but what you do with what you know that matters”

要查看或添加评论,请登录

Malik Shehu, CFA, MBA的更多文章

  • The Rise of The Dollar

    The Rise of The Dollar

    So. Why did the USD rise so much this year? Think of it like this: when there is hail, would you walk in the open? Or…

    4 条评论
  • Income and Growth; Real and Traditional

    Income and Growth; Real and Traditional

    I know, I know. Having a real asset is great.

    6 条评论
  • Venture Capital and Flora

    Venture Capital and Flora

    One of my dreams is to have a “green room”; a room just full of plants. Some on the floor, others hanging from the…

    4 条评论
  • Capital Budgeting (feat. Dating)

    Capital Budgeting (feat. Dating)

    You want a wife. In order to get this, you have to date.

    2 条评论
  • Defend Your Portfolio (Feat. Home Alone).

    Defend Your Portfolio (Feat. Home Alone).

    We've all watched the Home Alone movies. They used to play a lot during Christmas Holidays.

  • How To Pick Stocks (feat. Tinder).

    How To Pick Stocks (feat. Tinder).

    A number of us have been on Tinder looking for companionship, among other things. We can either swipe Right or Left…

  • How To Pay Your Debt (feat. Prison)

    How To Pay Your Debt (feat. Prison)

    1. There is a saying that, "when you enter prison, take on the largest prisoner to establish dominance".

  • How To Grow Wealth (Feat. Cows)

    How To Grow Wealth (Feat. Cows)

    You've recently inherited a cow. Before that, you had nothing to your name.

    2 条评论
  • Career Paths

    Career Paths

    Here are a few things to focus on when thinking of a career path. Something we should teach our young ones as well.

  • The Answers Are In The Questions

    The Answers Are In The Questions

    Hi All. I'm writing this because I've noticed a lot of people are seduced by the word "investor".

社区洞察

其他会员也浏览了