A key concept from Stephen Covey’s book, The 7 Habits of Highly Effective People is that what you “see” determines what you “do”, and what you “do” determines what you “get”. He suggests that our perspective determines our reality. When it comes to financial planning, I believe this to be true, and if so, the challenge to influence what clients “do” begins with influencing their perspective on money and life.
Arguably social pressure is the most influential. Clients may bring questions from the braai, or from the latest hype on X, Instagram or Facebook. The hype could be about crypto, Trump, Afrikaner refugees or AI. Whatever the source, invariably this leads clients to fall foul of the “narrow framing” bias. We focus narrowly on a particular issue/problem and then magnify its influence on our life, our money or both. For example, you may have a client invested in a range of funds that offer them diversification from an asset allocation and fund manager perspective.
Social media hypes the poor performance of one of the funds in which the client is invested. The recency bias means the client will want to address what social media says, and by falling foul of the narrow-framing bias, the client wants to change that particular element of their portfolio. If you want to shift the client’s perspective, how do you do it?
One way is to recognise that we can have different types of conversations with clients. Charles Duhigg, author of Supercommunicators, suggests that the type of conversation we have should depend on the needs of the person we are talking to. As he puts it, does the person want to be “helped, hugged or heard”? Each need requires a different type of conversation.
We often don’t know what we don’t know.
It seems the client in the above example wants help to change their portfolio. But it may be that they just want to be heard. Either way, to influence what the client does, I believe the starting point is to have a conversation which explores the client’s perspective. I call this a “Conversation for Perspective” which allows the client to reflect on and explore their own perspective on the dilemma/issue that they are bringing to the financial planner. In other words, it is a conversation about how they are “seeing” their concern. What is really influencing them to fall foul of the narrow-framing bias?
The key here is to help the client develop an awareness of their perspective. We often don’t know what we don’t know. By focusing the conversation on the client with curious open-ended questions, a financial planner can help a client become aware of any limiting beliefs or assumptions they are making with respect to their issue or dilemma, in this instance, the poor performance of a fund.
Rather than focusing on the fund, the key would be to determine what about this is troubling for the client. In this way you can get some insight into the perspective of the client and explore their relationship with their sources of information, be they friend, family or social media. Only once you have greater insight into what is driving the client’s perspective, would it be appropriate to take the next step and try to influence their perspective. If a client doesn’t feel heard, no amount of fact-correcting will influence them to shift from their narrow-framing bias.
The key is to help the client develop an awareness of their perspective .
Most often conversations about money and investing focus on the markets, products and investments. This is where financial planners have expertise, where they can show the client their authority. But it is also the place where the biases of the financial planner and their clients can easily trip them up. Just like the client, you may be tempted to focus too narrowly, getting caught up in discussing the pros and cons of the fund, rather than the overall portfolio, or more importantly, the client’s life.
I believe the most effective way for you to get a client to make the most appropriate decisions about their money and their life is to bring the conversation back to the client’s life. If you can help clients to use their own life as the key reference point for their perspective, this will be the most effective nudge to inform their decisions. Getting a client to consider the perspective of “What has changed in my life?” is a far more powerful influence on their decision-making, than “What’s happened to the fund I’m invested in?”
This is easier said than done. It requires courage for a financial planner to temporarily abandon their hard-earned status as an expert in all things financial and investment related. It requires courage and skill for financial planners to get clients to reflect on their perspective, how they are seeing their concern or dilemma, rather than defaulting to sharing expert insights and opinions.
Having a “Conversation for Perspective” can help clients improve their understanding of their situation and get new insights into themselves and the problems or dilemmas they may be facing. It is often a space where the curiosity of a financial planner helps the client unpack their assumptions and beliefs or critically consider what information they are using to inform their perspective. Enabling a client to shift their perspective is the first step in helping them make sound decisions about their money and life. After all, as Stephen Covey says, how your client sees things will determine what they do. And what they do will determine the financial and life outcomes they get.
