Chris Budd: Are you making your clients happier?

I've been running a series of online workshops with behavioural finance expert and Be-IQ director of behavioural insight Neil Bage, looking at behaviours around money and how advisers might deal with them (they're available for download, just drop me a line). The research for these has brought out some really interesting ways of making wellbeing a focus of financial advice.

In this month's column, then, I'm going to look at something you could do during this lockdown period. It involves reviewing your advice and procedures to answer this question: is your advice making your clients happier?

My suggestion is that you take 30 minutes each day to review one client file. This is an activity to determine the meaningfulness of the advice that you are giving.

First, though, a bit of wellbeing theory.

Intrinsic Motivations

An extrinsic motivation is something that we do to please somebody else, or for external reward (such as money, fame, praise etc.).

In contrast, an intrinsic motivation is something we do to please ourselves for its own sake. I think of intrinsic motivations as being things that are purposeful.

The key point for financial advice is that achieving an extrinsic motivation has no impact on wellbeing. Doing something to please others, to impress or to gain money, does not make us happy.

Achieving an intrinsic motivation, on the other hand, does increase our wellbeing. The kicker is, however, that failing to achieve intrinsic motivation reduces our well-being.

The ideal financial plan, therefore, is one that works towards achievable intrinsic motivations.

The Client Objectives

Now, let's head back to those client files. Look at the adviser meeting notes, or fact find, and hopefully there will be a note of the client's objectives (if there isn't, then you've a whole different problem…)

Let's have a think about those objectives.

Step 1: Are they real objectives?

First, let's check that we do actually have a real objectives in place. Do these objectives describe what the client would like to be different as a result of engaging the financial adviser, or do they simply pave the way for the advice that is about to be given.

"You would like to retire" is an objective. "You want me to consolidate your pensions and manage your investments" is not!

Step 2: Goal or motivation?

Next, ask if the objectives relate to a particular target, perhaps a specific goal, or do they suggest a deeper motivation.

The difference between the two is that once a goal is achieved, a new goal is required. A motivation, however, tends to be something that is purposeful, that continues to provide wellbeing after it has been achieved.

As an example, let's take a financial plan that helps someone to retire. This is a goal. Once reached, the goal has been completed. A motivation might be to be able to stop working in a job you hate and instead spend time making stained glass windows because that is your passion. The cashflow forecast will look the same, but the objective is very different.

Step 3: Intrinsic or extrinsic?

A few years ago I was coaching a business owner. At an early stage I asked how much he needed to sell the business for. He replied that he wanted £3m.

I'm always suspicious of such a round number, so I asked where that figure had come from. We talked about what life after the business might look like. After half an hour or so, he finally admitted that he wanted £3m because that's what a friend had sold his business for.

With more discussion, we started to get into the things that really motivated him - his intrinsic motivations. This enabled us to work on a cashflow which showed that he didn't need anything like that much money in order to do the things he wanted to do with his life.

Asking the question "How much is enough?" Can often start this conversation. If the answer to that question includes wanting to own things, or comparing oneself to others, then this is unlikely to bring wellbeing.

When reviewing your client files, therefore, ask yourself if your financial plans and advice will help the clients to achieve intrinsic motivation, thereby increasing their wellbeing.

Chris Budd is author of The Financial Wellbeing Book and Chairman of the IFW (Initiative for Financial Wellbeing). He also runs the Eternal Business Consultancy advising on succession planning and the Employee Ownership Trust in particular. [email protected]

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