As financial advisors, we understand that one of the most important (and difficult) things we can do for our clients is help facilitate positive behavior change. And not just change that keeps clients from doing “bad” things (like selling at a market bottom), but also change that enables them to do “good” things (like saving more for retirement).
Unfortunately, behavior change is hard, but the good news is that the difficulty of enacting behavior change also means it is one of the most valuable things we can do as financial advisors. And the human-to-human connection – and the social commitments we feel – provide some powerful incentives to enact behavior change… which means financial advisors serving as an “accountability partner” to their clients have the potential to drive more successful behavior change than what clients can do on their own.
In this guest post, Derek Tharp – our Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – analyzes some existing research in the contexts of weight loss and alcoholism to explorer the power of the human-to-human connection in holding us more accountable (than we can be to ourselves alone) to accomplish our goals and behavior our behavior.
In other words, the unique power of the human-to-human connection means clients can achieve better behavior-change outcomes with a financial advisor than they may be able to achieve by themselves or through the use of technological tools. Because when a human is involved, we often have few options for totally avoiding the unfavorable perceptions we think others may have about us if we don’t follow through on our goals… which can be highly motivating. In the case of technology, while it may provide useful behavior change reminders… we can always just turn off the technology, and feel very little guilt. But it’s far harder to just “turn off” an existing relationship with another person.
Of course, this still doesn’t mean that enacting behavior change is easy. It is very difficult, but by acknowledging the social pressure that exists within an advisor-client relationship, we can use strategies – such as setting clear action items for clients based on “SMART” criteria, and encouraging clients to leverage social forces in contexts outside of the advisor-client relationship – to can help clients improve their financial well-being. Ultimately, we human beings are herd animals, and as financial advisors we should keep that in mind as we develop strategies to help clients achieve their financial goals!