Do bodily functions have anything to do with how clients relate to their financial advisors? Can they influence financial behavior?
According to researchers in the Financial Planning Performance Lab at the University of Georgia in Athens, an individual’s physical functions – their heartbeat, the temperature of their skin, the amount of sweat they produce – seem to have an impact on their relationship with their financial advisor, an impact that in turn could perhaps impact their financial behavior and the kinds of financial decisions they make.
“Outside of financial planning, if you look at any health sciences, they have known for 50 years that people’s behavior is not drive solely by intention, and that there is a physiological aspect to human behavior,” says John Grable, a professor of financial planning at the university and the lab’s director. “In our lab, we want to test this relationship between money, behavior and financial planning so that we can eventually come up with tactical tools and strategies that financial advisors and planners can use in their practices to better understand their clients.”
Grable decided to test the effect of physical functions on advisor-client interactions after repeatedly observing a lack of “follow through” by investing clients. Even those advisors who have taken the efforts to integrate some of the core principles of behavioral finance in an effort to better understand and relate to their clients are, in Grable’s eyes, failing to get the results they hope for, since a lack of follow-through by clients leads to a repeat of the same kinds of financial behaviors and mistakes.
“We thought that if we could measure what actually drives people’s thought processes and attitudes, what actually shapes their reactions and decisions, we could get somewhere,” he says.
The lab’s experiments have shown that the more excited an individual is, the more likely they are to want to engage with a financial advisor and follow his or her recommendations.