This can lead to clients subconsciously saying what they think you want to hear, or acting in a way that is not necessarily their true nature.
Life can feel unreal and a client can feel further detached from their present life. Many people intended to use this period for self-improvement; learn a language, to play an instrument or get fit; few did.
As we begin to see the end of the pandemic, people’s attention is turning towards their goals and what they will do when lockdown and the pandemic is over.
There are behavioural and cognitive biases that can be amplified in this period.
When our time is filled with social and traditional media, and if that is our only connection, then herd mentality can be increased. Growing interest in certain stocks or trends, and the news around them, is a sign of this.
Bestowed with new information and perceived knowledge, a client can be susceptible to overconfidence bias, either in themselves or in their one source of information. This can go hand-in-hand with recency bias.
FTAdviser: In that case, how can advisers help turn these into positive investment behaviours?
CJ: Encouraging the client to take a longer-term view of the situation using cashflow planning and risk-based indices can bring useful context, particularly where the adviser can share experiences of similar, past scenarios.
Using the additional time available from increased efficiency, to talk to clients to understand and explain to demonstrate empathy and understanding, is key.
Advisers should also try to be self-aware and recognise these biases in themselves.
By reframing the problem and looking for positives, an adviser can redirect a client’s focus towards things that will improve their outcome.
The act of making a plan with a cashflow planning tool can allow the client to achieve a state of flow by immersing themselves in the task and forgetting the moment.
The activity increases the relationship with the planner and also refocuses on their relationships as part of the planning process and investment purpose.
LW: During this period, many people will have reflected and reassessed their life goals, which brings a sense of achievement.
This in turn increases confidence in the client’s ability to control their life and take action to overcome adversity and make good decisions.
Advisers can seek to understand their client’s personality traits and characteristics - such as extroversion, neuroticism, agreeableness, conscientiousness, trait anger, intolerance of uncertainty, resilience and of course self-efficacy.
