Advisers must understand what financial wellbeing means to their clients if they want to be able to give the best advice, according to a psychologist and family wealth consultant.
Speaking at CISI’s Financial Planning Conference, Dr Moira Somers said advisers need to understand how and why clients are making financial decisions.
She spoke at a panel titled; 'Behavioural finance sucks: Discuss' in conversation with Chris Budd, the founder of the Institute for Financial Wellbeing.
Somers said: “If generation one and two of behavioural finance talked about how to make good investments, generation three is about how to be a good adviser.
“We can’t be good advisers unless we understand what wellbeing means to clients and about how they make their decisions.
Somers said it is important for advisers to understand the “social context in which your advice lands” and said advisers need to look at aspects of their own firms that contribute to “sludge”.
She described sludge as decisions which make a process more difficult and can lead a consumer to disengage from the process.
“If your clients are having trouble returning paperwork that is an indication of the sludge within the process," said the psychologist.
“The fact is sludge slows people down and advisers really like to index clients' behaviours that get in the way of financial decision making and not their own behaviours.
“There is a tendency for all professionals to look with disdain to the people that we are helping, it really annoys us if people don’t follow through.”
Somers works with clients that advisers are having trouble engaging with on subjects including succession planning and will writing.
“Sometimes things that look incomprehensible [can be explained]. 100 per cent of behaviour makes sense to the person that is engaging in it. Sometimes it is a habit, sometimes they don’t know what the alternative is and sometimes they just don’t know.”
Somers went on to say it was down to firms to look at how representative they were to their potential clients.
The Financial Planning Conference is taking place at Wooten House Surrey and continues today (October 4).
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
