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How to Coach Clients Without Being Obvious

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In the world of financial advisors, these two facts exist:

Fact #1: Behavioral coaching adds enormous value to the lives of clients.

Fact #2: No one, and I mean no one, is asking for behavioral coaching.

Because, let’s be honest, your clients are smart, accomplished people and smart, accomplished people are unlikely to think they need you for “behavioral coaching.” 

So how can you, as a financial advisor, coach clients on their finances if they don’t want it or think they need it?

Enter Behavioral Finance, or BeFi. 

But first, let’s define BeFi.

What is Behavioral Finance (BeFi)?

The Association of Chartered Certified Accountants (ACCA) defines BeFi as:

“Behavioural finance attempts to explain how decision makers [make] financial decisions in real life, and why their decisions might not appear to be rational every time and, therefore, have unpredictable consequences. This is in contrast to many traditional theories which assume investors make rational decisions.”

Understanding that decision makers, like your clients, are going to want to systematically make irrational decisions, how can you lead them to make better decisions—in a subtle, non dogmatic, “I know better than you do” way. 

You seamlessly and imperceptibly ingrain Behavioral Finance, or BeFi, in your workflow and conversations. You present the solution in a different way.  

Embed BeFi in Your Workflow

BeFi is less about “open up and take this medicine” and more about behaviorally-informed design humming along unnoticed in the background.

Your questions, answers, suggestions, overtures, nudges, and outright recommendations need to be carefully crafted using cognitive psychology, behavioral finance, and question-centered therapy.

And that is hard! You have to train yourself so it’s an instinctual response—so the behavioral coaching we do goes unnoticed by clients.

How to Apply BeFi Like a Pro 

Brian Portnoy, PhD, CFA, and all around bad-ass in the field of Behavioral Finance (BeFi), wrote something recently which I do not believe I can improve upon. So, here it is:

“Want to know the cutting edge technology in applied behavioral finance? It’s not what you think. It’s not a new risk questionnaire or some piece of software. In a word, it is a Conversation. Generally speaking, behavioral finance has not landed well in the wealth space. Everyone loves Kahneman et al. and who doesn’t love a shiny dashboard with lots of personality metrics and whatnot. Half-read books and some toys don’t get the job done, however.

“So let’s level-set. What do most clients really want? Better conversations about the things that matter to them. What some advisors also want? Better conversations about those same things. Well, if I squint, I think I can see an opportunity here. 

“Let’s hold some space for this word ‘conversation.’ It’s remarkably vanilla. It doesn’t inspire. So how is something so seemingly meh applied to befi’s leading technology? Because it works! And because it’s hard. It’s what gets financial planning to solve real problems. 

“Quality conversations are a foundation to healthy relationships. But it often isn’t easy to articulate yourself clearly or listen accurately. Especially for sensitive topics or when in a state of heightened emotion.

“Too often, we communicate in a way that creates noise instead of clarifying meaning. We hear but fail to listen. The noise-to-signal ratio in the wealth business is awful. So what comes next? We start by accepting that interpersonal effectiveness is not wholly innate. It’s a skill set that we must learn and hone. This in itself can be hard to swallow. I know it is for me. 

“I think I’m an articulate-ish guy. Maybe a decent listener, but the more I learn about the technology of conversation, the more I know I need to be better. Like, much better. Getting there is work.

“As I see it, there are five core principles for having impactful conversations.

1. Empathy. When we feel ‘with’ someone. Your ability to take another’s perspective changes how you listen and respond. You need not have an identical experience to understand the person in front of you. Instead, you create a connection point around a shared emotion.

2. Attention. Unfractured attention and focus are critical elements of effective conversation. You are a student of the person in front of you. Get out of your head. Stop planning what you’re saying next. Pay attention to the signals you’re receiving verbally and nonverbally.

3. Humility. Set aside the need to be right. If your conversational goal is to win, prove yourself, or convince, you’re missing something important. Focus more on learning, not being right or convincing.

4. Openness. We’re fooling ourselves if we think we can shed all our judgements and biases. For better conversation, stay open to getting smarter and discovering something new.

5. Self-awareness. To have impactful conversations, it’s crucial to own what you are bringing. People are most effective when they can see the way their emotional state, internal narrative, and lived experience are influencing what they say.”

It’s Your Responsibility to Coach—Even If Your Client Doesn’t Want It

Ultimately, one of your main responsibilities is to help clients make better decisions when it comes to their money.

But this doesn’t have to be complicated.

Simply understanding Behavioral Finances and having impactful conversations with your clients can go a long way to their healthier financial future.

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