Most advisers understand this. Most advisers, when they crack out their favourite charts, do not do so in anticipation of them proving spectacularly persuasive.
It is simply that in the absence of a robust, reliable, and repeatable means of tailoring their approach to each client’s personal proclivities (and without spending half the working week doing so), it is the easiest thing to do. Thankfully, that is changing.
The future of financial planning is digital… and human
An understanding of an investor’s financial personality can be usefully combined with the behavioural adviser’s toolkit of interventions, to tailor and enhance each investment experience.
There are plenty of tools in the toolkit. For example: the use of defaults, deadlines, and pre-commitment plans; ways to adjust the emotional salience of the short and long term, or the narratives towards which our attention is most reliably tilted; just-in-time education; and ‘gamification’ techniques.
Done well, each interaction becomes an opportunity to learn what works and what does not for each individual, to hone messaging, or perhaps portfolio construction.
However, better still is to fast-forward this refinement process, by harnessing machine learning to review the effectiveness of all such interventions for all such individuals, turning the complex web of personal finance recommendations into the ultimate investor understanding training ground.
From there, it is not too bold a leap to see how using technology like ChatGPT can personalise messages not only effectively, and at scale, but in contextually conscious real-time.
Thus armed, advisers can be vastly more effective in communicating the right message, in the right way, to each client, at the right time.
Cost-effective emotional comfort
The overriding reason people get stuck in cash, despite knowing why and how not to, is a lack of emotional comfort making the right decision at the time of making it. People sit on mountains of cash not because it is secure, but because it feels secure in the moment.
You cannot reduce the need for emotional comfort with a calculator, nor offset it with a graph. But with the right combination of behavioural understanding, machine learning, and adviser nous, you can provide it at both lower cost and to greater effect.
Greg B Davies is head of behavioural finance at Oxford Risk
