Do you ever wonder why clients don’t always do the things they know they should do? Heck, do you ever wonder why you don’t always do the things you know you should do?
The burgeoning field of behavior finance studies why investors aren’t always rational but are likely swayed by emotion or internal biases. The Corporate Finance Institute has a Behavioral Finance Course that groups decision-making biases and errors into four groups:
- Heuristic Simplification
- Social Influence.
I wonder if a simpler explanation is that doing the right thing can be hard to do.
In his book Tiny Habits: The Small Changes That Change Everything, BJ Fogg shares his model for understanding behavior.
According to the Fogg Behavior Model, three elements must converge at the same moment for a behavior to occur: Motivation, Ability, and a Prompt (B = MAP). Motivation is a person’s desire to do the behavior, Ability is one’s capacity to do the behavior, and the Prompt is the cue to do the behavior.
As the chart below demonstrates, Motivation and Ability are directly related. You’ll do hard things when your motivation is high. Similarly, you’ll likely act even when your motivation is low if something is easy to do.
Consequently, if you want something to get done, it’s best to make it as easy as possible.
For financial advisors and financial planners, how can you make it easy for your clients?
Here are three suggestions:
- Simplify the activity as much as possible. Signing a pre-filled form is so much easier than filling out a new form. Returning that form in a pre-addressed, stamped envelope is simpler than scanning it. E-signatures are simpler than wet signatures. Even just highlighting or flagging where to sign makes a difference.
- Share helpful tools and resources. Help your client take the next step by directing them where to find appropriate tools and resources. For example, if they need to gather their Social Security statement, point them to https://www.ssa.gov/myaccount/statement.html (not just ssa.gov).
- Accurately estimate the time required. Tell the client what to expect when completing an activity so they can plan accordingly. Just make sure that your estimate is accurate as a “short, five-minute” form that takes 30 minutes to finish can be incredibly frustrating.
- Determine an appropriate reminder system. Ask your client what is the best way to help them stay on track. Perhaps you can print out a list of action items, or write them on an 4×6 card. Maybe they prefer a weekly email reminder.
If you want your clients to act, start by making it easy.