Why advisors should stop talking and start coaching

When Elvis sang “a little less conversation, a little more action, please,” he could have been appealing to advisors about the importance of behavioural coaching in getting clients to act.

Advisors should help most clients set-it-and-forget-it, says Kelly Peters, CEO and co-founder at BEworks, a Toronto-based behavioural economics consulting firm. That means less focus on conversations aimed to educate clients and more on behavioural coaching.

Tactics to get clients to act include choice optimization and storytelling. With choice optimization, clients are presented with realistic, discrete options that are easy to choose between.

For example, asking clients if they want to live in a house or condo in retirement, or how many days they want to travel, are easy questions to answer compared to, say, estimating required savings amounts. Such questions also close the gap between our present and future selves, says Peters.

Read: How much retirement saving is enough?

Storytelling is another tactic, with clients encouraged to, for example, write a letter from their future selves describing their lives in retirement.

“The more you help people […] experience the visualization of being old, the easier it is for them to give us more realistic and accurate answers,” says Peters.

Read: Learning to love your future self

Similar tactics are described in the OSC’s recent paper on encouraging retirement planning through behavioural insights. The paper recognizes various barriers to planning, including overcoming inertia to get started.

Motivation to act

“There’s a huge gap between people who say they want financial advice and those who actually follow through,” says Peters. Key is overcoming clients’ behavioural or psychological factors, so that advisors can build trust with clients, she says.

The OSC’s paper identifies various reasons people avoid retirement planning, including the perception that it’s a complex, lengthy process and the desire to avoid negative emotions.

To address such concerns with new or prospective clients, Peters recommends advisors assure them they’re not alone and that many people struggle with the topic of finances. It’s a matter of repositioning accountability from clients to themselves when it comes to financial expertise, says Peters.

Advisors should also inform clients of the consequences of avoiding finances, including research that shows working with advisors increases a client’s savings.

Peters further suggests advisory services could build on its success at getting clients to save. For example, paadnas are collective saving schemes, popular in some Caribbean communities, whereby each week a group member receives total amounts contributed by the others. An advisor could adapt that idea by creating a client group with collective goals and sharing the group’s performance among members, thereby creating a sense of commitment—and peer pressure—to reach goals.

IFIC to study fee and performance disclosure

Peters’ firm will soon be applying behavioural economics to fee disclosure. IFIC has retained BEworks to undertake research to improve disclosure practices related to CRM2.

Read: How client awareness of CRM2 benefits advisors

In a release, Paul C. Bourque, IFIC president and CEO, says the research project will examine cost and performance statements to “help the industry develop and test new approaches that leverage behavioural insights.”

The project will involve reviewing research to identify best practices for effective disclosure, assessing current fee and performance statements against those best practices, and developing and testing model reports against current statements.

The project is expected to be completed in early 2019. BEworks will speak about this research as part of a panel on effective disclosure at IFIC’s annual leadership conference in September.