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Financial Planning > Behavioral Finance

Come join my HAPPY group of clients

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I started in the financial industry right out of college in 1997.  Although I never got any real sales training, I have always simply led with my personal convictions about what is best suited for my clients. This is something I still practice, and it has served me well throughout my career. But an encounter several years ago with two ground-breaking areas of study significantly altered my approach to effective client communication. Those were behavioral finance and neurofinance. I’m confident it will do the same for you.

While conducting research in the areas of behavioral finance and neurofinance, I made a discovery that dramatically affected the way I communicate in my practice. The field of behavioral finance uses ideas and theories from psychology to explain why certain anomalies occur in the stock market. The field of neuro-finance looks at the cognitive processes people use in their financial decisions.

Why did this research change my practice so significantly? Both of these areas of study help us better understand why we, as emotional individuals, make financial decisions in the manner we do. I highly recommend you study both of these fields because it will make you a better communicator, which will considerably enhance your business. I learned I needed to help paint a simpler and more emotional picture for clients when explaining what I was proposing for their financial plans.

Certain products and strategies can be very complicated and confusing to clients. You can do the best you can to explain, but sometimes you get the uncomprehending stare and then the famous words, “Let me go home and think about it.” And then you never hear from them again because they simply did not understand what the strategy would mean to them financially. To avoid this kind of reaction, here is how I recommend positioning features and benefits when explaining a product or service.

Let’s say you are talking about a dividend-based portfolio that is focused on producing income for the client’s income needs. Read on to find out what you should and shouldn’t say.


DO say:

“Mr. and Mrs. Jones, how would it make you FEEL to know that you have a plan in place that is focused on helping you produce income, with potential price appreciation as well?”

Repeat their answer, which is most likely to be positive: “Well, Mr. and Mrs. Jones, that is how it makes our clients feel … ”

DO NOT say:

“Mr. and Mrs. Jones, do you like the idea of having a portfolio that produces income and potential price appreciation?”

There is a clear difference between these positioning statements. No one wants to be put on the spot and have to answer “Do you like this?” Your clients are not sure, which is why you are taking the time to educate them. What they will be able to easily respond to is a qualifying question about how something would make them feel.

The second and just as important step is letting them know their response is exactly what your current clients say as well. This shows them they are not alone in this feeling and there is a group of happy clients out there. And, if they want to, they can join them; your solution is a part of that process.

Remember, we don’t want to be on a lonely island when it comes to investment decisions. Potential clients are in your office to help reduce risk, so help them understand by connecting each feature/benefit to a feeling. Taking the time to learn about how your clients respond to their investment decisions will allow you to find more efficient ways to communicate.

As always, I look forward to continuing to share different strategies that will help you grow your practice!

See also…

The biggest problem independent agents face

What is your narrow road?

Great accomplishments require a great team

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