Behavioral finance is using psychological principles in the business of finance and economics. But the application of psychology doesn’t have to be reserved to improving our financial decision making. We can take the same principles to improve many aspects of our business, especially the way we communicate.
Connecting With Others
The need to connect and engage clients is very important these days. Connecting and engaging is psychologically deeper than contacting or talking to someone. It’s certainly more than using a marketing library to send emails to clients and post content we don’t even read to social media.
Connecting is deeper. We need to have a good message, and we also need to make sure we say it in a way that is easily (and correctly) understood by the other party. In psychology they call this “framing”. The way we frame a message can have a significant impact on how the other person perceives us and interprets the message. What you say isn’t always what the other person hears. And this is especially true in the financial realm.
Beware of Ambiguous Terms
We regularly use ambiguous terms we throw around all the time as if they had one universal definition. For example, advisors will often state (either verbally or in written material) that they work with high net worth individuals. What is high net worth? Is it $1 million, $5 million, 25 million…? How about “risk”? That is ambiguous. Some people define risk as opportunity, others view it as uncertainty or loss and others may interpret risk as the unknown. What do you mean by “risk”, and more importantly how does the person you are communicating with define it?
Perhaps this is the greatest lesson about communication. It’s not about you. It’s about your audience. You need to get out of your perspective and see things through your clients’ lens. And remember, most humans are more influenced by psychological factors than by rationality/logic. Be sure your communications reflect that fact.
We work in a commoditized industry. Just about everyone offers a plan, a portfolio and access to a human advisor for some price. That price can differ drastically from full-service advisors to personal advisory services that charge next to nothing. Unfortunately, because price is often the only clear differentiator, it has a lot of power to influence the investor’s decision.
I can’t tell you how many financial advisors’ websites say something about how they are different. Then I look at what makes them different, and they talk about a plan, a process and caring about their client. Umm…that’s not different. That is what every advisor offers and says. Just because you say you are different, doesn’t make it true. This is one of the hardest truths for advisors to understand – their processes and deliverables really aren’t that different. If you ignore that truth, you may miss the opportunity to progress and increase your value. If you face it head on and do something about it, you may be able to improve your game, and ultimately your business.
Do you actually offer something different? I would say that effective application of behavioral finance is different, but you still have a challenge. Most advisors don’t know how to effectively apply behavioral finance. And how do you frame such to a client or prospect? How do you ensure that the client perceives whatever you offer as different and superior to your competition?
Your Value Headline
This is where proper framing and the psychology of communication come together. And it all starts with your value headline. Notice, I did not say “value statement” or “mission statement”. People don’t read these days; they skim and scan. You need to figure out what you want to highlight and make it pithy and personal to you. This is not an easy exercise.
Recently a lot of my time has been dedicated to helping advisors come up with their own value headline that represent how they want others to perceive them – and make sure it doesn’t sound like any other advisor. This is often done through strategy calls, brainstorming sessions and back and forth emails. But with each one, we eventually find it. Yes, it takes time and mental energy. But if you really want to be different, you actually need to do things different and say things different.
Contact me to talk more about how correct application of behavioral finance principles can help you grow your business.