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Financial Planning > Behavioral Finance

4 ways to help LTC planning clients believe in themselves

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Last year, I wrote a two part blog for LifeHealthPRO entitled You, the Educator. In it, I discussed how the more information you provide your client about his or her personal finances, the greater the client’s motivation will be to save, invest, insure and plan for the future.

I want to revisit this theme, as client education plays a critical role in the long-term success of your professional relationships. Each client has different needs, with unique motivations that you must first decipher in order to develop a plan. Unraveling these motivations can be difficult, but understanding clients’ financial motivations is a critical component to building success for them and for you.

World-renowned psychologist Albert Bandura of Stanford University studied human behavior and motivation, focusing much of his career on the concept of “self-efficacy” — people’s belief in their ability to succeed in specific endeavors. Self-efficacy can be applied to your clients’ beliefs that they are able to succeed in creating a financial strategy that works for them. Because self-efficacy can be such a powerful catalyst for positive change, researchers have been exploring the connection between it and financial well-being.

One stated, “Financial efficacy appears to be the missing link between knowledge and effective action.”

“People who believe that they can successfully engage in personal financial matters will do so with a positive attitude, exert more effort, enjoy the persistence and recover more quickly from disappointments and setbacks. People who have self-doubt in this department will have negative attitudes, remaining fearful of making decisions and not coping well with disappointments and setbacks.”

By integrating Bandura’s four sources of self-efficacy into your practice, you can leverage it as a source for motivation and success with your clients. Follow these steps and see what a difference you can make in your clients’ lives.


1. Success

Performing a task and experiencing success is the single most effective way to build self-efficacy.

Education opportunity: A client’s past success or failure in financial matters is the strongest indicator of the client’s financial self-efficacy. If a client has continually failed to achieve financial goals, it is very likely that the client will continue to fail in the future.

One action you should take with these clients is to define short-term achievable goals that offer them the opportunity to experience success and build to a higher level of financial self-efficacy. This could be as simple of a financial goal as create a separate rainy day savings account. Successfully doing this could provide the confidence the client needs to take on larger financial goals such as creating a financial strategy to reduce spending and pay off debt.

See also: Seven success statements from Henry Ford.

One man watches another man do something with a computer


2. Vicarious Experience

Watching close friends, colleagues or relatives successfully manage their own finances.

Education opportunity: During your client meetings, probe through open-ended questions that may provide insight to people in their lives who they admire or wish to financially emulate.

Statements such as “my brother and his wife were able to take early retirement” may allow further discussion about how that success was achieved and what things your client can do to achieve similar outcomes.

See also: Real Celebrity: Extended care, part 1.

Someone telling someone else, "Good job!"

3. Verbal encouragement

Verbal encouragement can persuade people that they possess the skills necessary to succeed.

Education opportunity: Highlight areas in which your clients have enjoyed success in their lives and explain how those same skillsets can deliver success in financial matters.

See also: Flattery will get you nowhere … Right?



4. Managing physical and emotional response

Moods, emotional states, physical reactions and stress can all affect the way people view their capabilities. The ability to minimize stress and elevate mood while performing difficult and challenging tasks can improve a person’s self-efficacy.

Education opportunity: Although the stress in a person’s life or the mood the person is in may be difficult for you to control, the unknowns of future finances like long-term care may greatly impact that emotional state. This is the perfect opportunity to suggest your clients have the “Let’s Talk” (GNW/Let’s Talk) conversations with family members and put into place a strategy to deal with the emotional, physical and financial possibilities of those issues.

See also: How baby boomers stay resilient.


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