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.
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.