Behavioral Coaching

Behavioral coaching is a term used often among advisors. But what exactly is it? Behavioral coaching is an ambiguous term. It has become a buzzword and is often misapplied. Anyone can call themselves a behavioral coach, but what does that mean? One advisor may have a few conversations about biases with clients and call herself a behavioral coach. Another advisor may define biases he sees in clients and provide a white paper or report on how to behave better. What really matters is how effective you are in coaching your clients. The message is one thing, how you frame it is another. Effective coaching influences better financial decisions and improves the investor experience. Talking a client off the ledge is good; making sure they never get there is better.

Limits of Education

Educating others with facts is seldom an effective motivator or catalyst for behavior change – even when the education clearly demonstrates we would be better off doing A than B. Take losing weight. We all know the solution is straightforward – burn more calories than you consume. Simple in theory and fact, incredibly difficult in practice. Same thing with working out. It is fairly easy to understand how to lift weights safely, yet many people hire personal trainers.

If it were as easy as simple education, personal training would be one meeting and done. Personal training is a booming industry because people have a hard time doing it, despite knowing what they should do. Some individuals pay for, and value, the coaching and accountability a personal trainer offers. Effective behavioral coaching is becoming your clients’ personal financial trainer – making sure they don’t hurt themselves. If we want to help investors make better choices, we need to teach correct perceptions and realistic expectations. And to be effective, it needs to be done proactively and consistently.

Educating Effectively

An element of behavioral coaching is educating, but not with factual and rational statements; not with a white paper or defining biases. Instead, we consistently and proactively teach correct perceptions and reinforce realistic expectations using timely examples. These messages go beyond volatility and performance. It’s about how they may feel at different times and temptations they are likely to face. You may have created a great plan for your client, but the media, in conjunction with our behavioral biases, are powerful temptations for investors to abandon their plan.

Today we are facing increased emotions around an election. The danger is that people vote with their portfolio, which we know can be very costly.So how are you going to get in front of this? Just telling someone not to do something is very ineffective. Especially when someone is emotional, we need to validate their feelings and then pivot the conversation to productive and deliberate decisions. But making that pivot can be tricky. Do it too quickly and you will seem shallow – like its just words. Do it too slowly and you won’t be an effective coach. Messaging the message is paramount to effectively coach advisors.

Communicating the Message

Once you know what perceptions and expectations to share, the next step is to figure out how to share them. Just because you send your client an email doesn’t mean they are reading it or find value in it. Several years ago MIT Age Lab studied what type of communication gets and retains people’s attention. They found that the most effective content needed to be easy, smart and fun.

In my years of producing behavioral finance content, I have found that messages that are also timely can be very effective. They not only get your clients’ attention and reinforce a valuable perception, but the content is highly shareable because it is easy, smart and fun. In my experience, advisors report increased open rates, and clients are actually engaging with them – responding back with comments. Some advisors have also reaped the benefits of their clients sharing the content with others. Clients may not feel comfortable talking about finances with their friends, but they are happy to share novel content with the very people you want to get in front of.

Want to see the election specific behavioral content I produced for my network of advisors? Just schedule a brief call with me and I will walk you through it and suggest ways you can effectively coach your clients with the election in mind.