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Getting into their heads
Getting into their heads

May 01 2023 / Round the Table Magazine

Getting into their heads

Understand how clients think to help them make better decisions.

By Mike Beirne

Topics Covered

Helen Jayne West, APFS, wanted clients to understand their savings plan as well as she did. The 24-year MDRT member from Plymouth, England, UK, was driven by the belief that good advisors should share all their knowledge. She doesn’t do that anymore. She decided to become a better communicator instead. 

Pamela J. Sams, CRPC, a four-year MDRT member from Herndon, Virginia, USA, would create what she thought were top-notch financial and insurance plans that received initial affirmation from clients but then no follow-through. She didn’t know why they declined to sign on the dotted line until she equipped herself to understand how people think about money. 

Advisors can tell clients all about the best possible products and services in existence that offer the perfect solution for their situation, but it can be all for naught if the customer doesn’t believe in insurance or declines your investment recommendations because they have a bad case of loss aversion. While fully understanding the advice you’re giving is essential, the ability to connect with clients by understanding their biases and behavior could be more valuable. 

Subconscious map of the world

“I watched fellow advisors become better communicators with their clients by doing what some life coaches did,” said West, who earned Neuro Linguistic Programming (NLP) Master Practitioner certification from the UK-based International Network for Humanistic Neuro Linguistic Psychology to improve her communication with clients. “Life coaches help people who want to achieve specific goals by moving from where they are to where they want to be. That also is what advisors do with their clients’ finances.”

I was inflicting my map of the world onto other people.
—Helen West

NLP essentially strives to build better communication between subconscious and conscious mental processing. A basic NLP assumption is no one sees their life objectively because objective truth passes through our subjective experience. Our thought filters — shaped by senses and our collection of memories, beliefs, values, identity, skills, environment and sense of purpose — distort information and make us see ourselves, other people and events in a more negative way. 

These internal filters create our map of the world, which is unique from everyone else’s map. That is why two people can look at the same set of facts and draw different conclusions from it. We react to this map more often than we do to reality and reinforce it through our words and the way we think.

 “I was inflicting my map of the world onto other people, which I didn’t realize until I did the NLP program,” West said. “That was quite valuable to me to be able to take a different view of other people’s situations and remove my internal filters, biases and preferences out of the way. It’s all about the client, so I focused on what was important to them, what they want to do or what’s holding them back.”

What an NLP practitioner does is delve into the structure that created this map. These beliefs have great impact on how people perceive themselves. Once there is understanding about how these beliefs were created, they can be changed, or at the very least, we have insight to how thinking patterns affect behavior and decision making.

Connecting with a story

West’s exploration of a client’s beliefs allowed her to frame her advice in a way they understand. She had a client who was a farmer, and his wife inherited a hefty mutual fund from her mother. The late mother’s advisor was recommending they sell it to avoid higher fees that were about to take effect. Then he would buy another investment with lower fees. She started asking her client questions about the fund and learned that his mother-in-law had owned the contract for 24 years. Then, using his occupation as a farmer, West created an analogy that helped her relate to his world. 

West told him: “Those seeds were planted 24 years ago, and they have grown to quite big trees. If you chop those trees down — in other words sell the contract — you’ll have to go and open a new field and plant those seeds. How long will it take for those seeds to grow back again? The farmer gets it. He gets the seed, he gets the tree, he gets the passage of time. So, after a conversation he talks to his wife and says, ‘We want to keep the investment the way it is. Just transfer it to my wife’s name, and we’ll talk about it again when we come to see you for the annual review.’” 

So, I said those seeds were planted 24 years ago, and they have grown to quite big trees. If you chop those trees down, you’ll have to go and open a new field, plant those seeds and how long will it take for those seeds to grow back again?
—Helen West

For her airplane pilot client who wanted to sell his stocks during a tanking market, she tapped in to his aviation map of the world. 

“He was really panicking, and I just said to him this is a medium- to long-term investment; you are going to strap your belt in, hold tight, and we are not going to jump out of the airplane,” she said. “We have to hang on until those units regain value. He was paying me to be his advisor, and I got him out of a patch. Had he jumped out of the airplane, he would have sold and been very sad because the market was back on track three months later.”

Be it the client’s occupation, hobby or favorite sport, West finds a way to ask the right questions and tell a story that connects with their thought structure and clarify what they want and how to get there. 

Not all her advising pertains to finances and insurance. She also leans on NLP for coaching clients to defeat their self-limiting beliefs. A 35-year-old mother would like to attend a university but believes she is too old to be at a school among younger students. 

“So, you ask why would you want to go to university? What would be the benefits of studying? What subject would you pursue that you thought you were too old to go and do?” West said. “You just keep talking about it and leading them on a path. They’re telling you that if they got this qualification, they’d apply for this job and be on a career path with a pension and travel, and their daughter is 16 and doesn’t need as much parenting, so perhaps she could afford to work part time and go to school. If the conversation goes on long enough, they’ve talked themselves into a different situation. The secret is to ask (questions) and not tell.”

Behavioral finance

Sams has a minor in psychology from the University of Missouri, but rarely used that discipline in her practice until her broker-dealer offered an opportunity to earn a behavioral financial advisors (BFA) designation. She jumped at the chance to enroll in classes and learn how bias was preventing clients from following her recommendations. 

BFAs integrate traditional finance with psychology and neuroscience to positively influence clients’ spending and saving behavior in the presence of challenging emotions. Behavioral finance recognizes that the human brain has three parts, and people make most of their decisions with the limbic, or emotional part, not with the neocortex, the rational part. BFAs are also trained to understand how behaviors like loss aversion, buyer overconfidence and other motivators push people to think irrationally so they can help clients make better decisions.

“Once I started to introduce some of the behavioral concepts and understanding why clients make the decisions that they do, it was a lot easier to understand them,” Sams said. “From there, I aligned anything that I introduced in terms of solutions with what they wanted to achieve through their values.”

To discover those values, she conducts a values cards exercise. Clients go through 52 cards with values written on them like safety, stability, helping others and happiness, and they can add their own custom values on cards. They put the values they align with in a yes pile and discard the rest in the no pile. Then they whittle the yes pile to 15, 10 and ultimately down to their top five values. 

“Then I have a conversation around those top five. I’ll ask why did you pick family, for instance, and they might say, ‘I didn’t grow up with a close-knit family, so family is very important to me, and I want to make sure my immediate family has that,’” Sams explained. “Or if they picked security because ‘I want to make sure my family is secure and will not want for anything if I’m absent.’ So, that becomes a life insurance conversation. A lot of it deals with what their values are and then coming up with that solution and making sure they’re in alignment with that.”

Before becoming a BFA, Sams would sell life insurance by touting the benefits and determine how much coverage clients needed. But that approach would never drift toward a line of questions that could divulge the root cause for why a client declined coverage. Maybe their parents or grandparents paid premiums years ago on a flimsy policy that promised more than it actually paid out, if anything, and that experience influenced the children’s view about the product. With the behavioral finance approach, Sams can learn what is holding them back. She can then explain that the insurance industry has evolved since those days and coverage that takes care of their family financially and pays for their children’s education connects with their value for security.

Overcoming risk aversion

One of Sams’ clients was a woman who arrived in the United States with her parents as refugees fleeing the war between the Serbians and Croatians in the former Yugoslavia. 

“They had to flee their country, and they didn’t have a lot of money,” Sams said. “She was really averse to losing any money, so investing was very scary to her because she didn’t want to take on any risk.”

So, Sams teamed with a third-party money manager and customized a financial strategy that aligned with the client’s values of wanting security and lifetime income. She took “baby steps” and started with a conservative portfolio, as this was the client’s first foray into investing. Later, Sams explained that inflation eventually would outpace this portfolio and her investment would not grow. Then she showed her that stepping up to a moderately conservative portfolio would enable her to achieve her value for lifetime income. 

They had to flee their country, and they didn’t have a lot of money. She was really averse to losing any money, so investing was very scary to her because she didn’t want to take on any risk.
—Pamela Sams

“It’s all about having those conversations and introducing how solutions align with their values and getting clients from point A to point B efficiently,” Sams said. “Having those deeper conversations with clients allowed me to understand them from the root cause and then develop solutions that move them forward with their financial life. If I didn’t know any of that, then it would have been hard to engage or understand why there is pushback on certain solutions.”

After earning her BFA, she introduced her behavioral finance process to new clients, but then launched rediscovery sessions by applying it to her existing clients. 

“I found out more stuff about existing clients that I had been working with for 10 years that I didn’t know,” she said. “We’ve had great relationships before, but behavioral finance gave me a different sense of where they’re coming from and understanding them as a person, not just the financial stuff. That makes the relationship a little more sticky because you’re not just concerned about what you can do for them as an advisor; you’re understanding them as a person.”