Understanding Client Money Behaviour

The human hand is a remarkable example of evolution. Over a period that started about 6 million years, our ancestors developed hands that have relatively long thumbs and short fingers, as well as extremely strong muscles and robust finger bones with large joints. This allows us to grip objects between the fleshy part of the thumb and the tips of opposing fingers in a very precise manner. We can’t swing through trees any more but we can make and use tools, and this ability is at the heart of everything that we have achieved. The human hand did not evolve to hold mugs or cups – mugs and cups are designed to work with our hands. So are pencils, phones and all of our tools. This may sound like an obvious point – these objects are designed to work in harmony with the way our bodies work. A pencil that you can’t hold is of no use to anyone.

But what happens if we look at the financial services industry and ask whether it’s designed around how we think and behave around money? For example, does the financial planning process take into account how a person feels about their money? Do we even know why we feel a certain way about money or where our behaviour comes from? Does the fact-find process explore money beliefs? Almost by definition it doesn’t. ?It’s a data gathering exercise driven by compliance and regulation. And because money has numbers, money discussions tend to be reduced to numerical discussions. We apply maths and logic. Facts, figures and cashflows. The paradox at the heart of financial services industry is that it’s all about money, but it’s not designed around the way we think and feel about money except in the area of product sales. ?Here the full weight of behavioural insights and cognitive manipulation are used against us.

So what does a financial planning or advisory process that is designed around how we think and feel about money look like? We need to start by acknowledging that thinking about money and talking about money are not just about numbers. There is an emotional side that is at the heart of everything to do with money. This is because money is tied into our self-worth and our security. And this means our money behaviour is driven more by our subconscious patterns and reactivity than by logic.

Secondly, technical skills are critical but not sufficient. The emotional and behavioural competencies of planners and advisers have a significant effect on clients’ perceptions of their trust and integrity. And it is trust and integrity that are at the heart of any relationship. The problem is that these competencies are not usually part of the training process. We’re simply not taught how to understand how clients feel about their money. Their relationship with money is not part of the process. ?But how people think and feel about money informs how they save, spend and invest. ?And these are the core areas of activity for the financial services industry.

The starting point is being open to the experience that the client is having by learning how our relationship with money works. This includes internal factors such as money beliefs, and external factors such as what is going on for them in their lives. Finally, we need to understand how, as financial professionals, our own beliefs and attitudes are impacting the process.

If you like to know more about how to do this, please contact me or sign up for one of my monthly workshops. These are specifically designed for financial professionals who want to learn how to understand client money behaviour and build strong and fulfilling relationships. Visit Cambridge Money Coaching to find out more.