1 / 27

POWERED BY YOUR FINANCIAL FOOTPRINT

This module explores behavioral economics, with a focus on loss motivation, to help financial professionals better understand and articulate their value to clients. It covers key biases that drive client decision-making and provides strategies for implementing behavioral insights into client meetings.

lorij
Download Presentation

POWERED BY YOUR FINANCIAL FOOTPRINT

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. POWERED BY YOUR FINANCIAL FOOTPRINT • BEHAVIOURAL ECONOMICS • ‘LOSS MOTIVATION’ MODULE

  2. This is the fourth of four modules… • Introduction to behavioural economics • Attention grabbers to explain what it is and its value • Reframing • New and existing client meetings to focus on advice • Consistency • Showing how best to use existing provisions • Loss motivation • Value through tax and risk management

  3. Our aim • Share insights into some typical Behavioural Biases that may drive clients emotional responses at ‘advice meetings’ • Help you better understand the buying brain so you can better articulate your value • Support you in delivering a profitable and sustainable service that clients truly value

  4. Objectives • Understand at least 1 key behavioural bias that drives decisions to help a client better understand the value you add • Understand • Demonstrate • Demonstrate how to implement at least one example of using this • Agree • Agree an commit to an appropriate implementation plan

  5. Objectives • Your objectives and challenges? In the initial parts of client meetings (new & existing)

  6. LOSS MOTIVATION

  7. LOSSES LOOM LARGER THAN GAINS v(x) 6 4 2 -20 -15 -10 -5 5 10 15 -2 20 x -4 Oct. 9th 2002 Daniel Kahneman receives the Nobel Prize in Economic Sciences -6 -8 -10 Prospect Theory

  8. ???

  9. ??? Value and propensity to act is accelerated by a feeling of potential loss… “Roughly speaking, losing something makes you twice as miserable as gaining the same thing makes you happy.” ‘Nudge’, Thaler and Sunstein 2008

  10. ???

  11. HEAR WHAT YOU’VE BEEN MISSING! 45% • Hear what you’ve been missing • New!

  12. SIGN IN THE PETRIFIED FOREST, ARIZONA Our heritage is being vandalised by the theft of 14 tons of wood each year Hurry while stocks last!

  13. Loss motivation accelerates with salience • Comprehensive advice does not need to be onerous or time consuming • Linking to the advice area increases salience • How do you link ‘protection’ to the areas of investment to become more salient?

  14. ??? • INVESTMENT • Wealth Protection • Wealth Preservation • Property Wealth

  15. ??? • INVESTMENT • How sure are you that you have eliminated the risk of eroding your wealth due to ill health? • Should anything happen to you before you get to spend your monies, how do you want that distributed? • How will you replenish any investments you use to clear your debts?

  16. Efficient frontier? • “Not take unnecessary risk with your current portfolio” • “Not miss out on getting a better return for your level of risk”

  17. Turning BENEFITS into LOSS MOTIVATION STATEMENTS… Benefits Loss Motivation Protect your hard earned money in valuable tax shelters Ensure the right tax wrapper helps your money grow We rebalance your portfolio to keep it in line with your objectives Boost your pension fund with extra money from the Government Ensure you do not miss out on time sensitive allowances, that once they go are gone forever

  18. Turning BENEFITS into LOSS MOTIVATION STATEMENTS… Benefits Loss Motivation Protect your hard earned money in valuable tax shelters Ensure the right tax wrapper helps your money grow We rebalance your portfolio to keep it in line with your objectives Boost your pension fund with extra money from the Government Ensure you do not miss out on time sensitive allowances, that once they go are gone forever When you spend your money, you retain as much of it as possible (and do not lose any unnecessarily to tax) Make sure you do not miss out on getting the return your level of risk taking allows Help ensure you do not miss out on valuable monies that you may be owed

  19. Turning BENEFITS into LOSS MOTIVATION STATEMENTS… Benefits Loss Motivation Review your current plans to see how much money you can save Help ensure you keep your home should the unexpected happen Help ensure you and your family have money available when you need it the most We place your life cover in trust to ensure the right money goes to the right people at the right time See if you can benefit from better cover, often for a lower premium Ensure you are not wasting your hard earned money by paying too much for your cover / peace of mind

  20. Turning BENEFITS into LOSS MOTIVATION STATEMENTS… Benefits Loss Motivation Review your current plans to see how much money you can save Help ensure you keep your home should the unexpected happen Help ensure you and your family have money available when you need it the most We place your life cover in trust to ensure the right money goes to the right people at the right time See if you can benefit from better cover, often for a lower premium Ensure you are not wasting your hard earned money by paying too much for your cover / peace of mind Eliminate the risk of you and your family losing your home Make sure you do not lose the growth you have already made, by having to draw on it earlier than planned Help you not lose money to the tax man, ethically and legally Not lose out on better cover that is now available….

  21. ??? How will you remember to implement this?

  22. Frameworks Introduction Guidelines (using Trust components) Template

  23. We also have some example words for you It aims to provide some prompts and examples that you can personalise and implement in your own style It is not designed to be memorised, scripted and repeated verbatim It is designed to stimulate your thoughts and process, so a client can understand better the value that you add

  24. Real play experiment time If you wish to explore further we have included real play scenarios You can focus just on the area covered in this module…or You can link the three areas of ‘reframing – consistency – loss motivation’ together in the same scenario if you wish

  25. Your key learnings? • More of: • Less of: • Start doing: • Stop doing:

  26. References Kahneman, D. (2012). Thinking, fast and slow. Penguin Books. Retrieved from http://library.city.ac.uk/record=b1526364 Kahneman, D., Tversky, A., & Tversky ’, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Source: Econometrica, 47(2), 263–292. Retrieved from http://www.jstor.org/stable/1914185 Luise, V. (2005). Facts and Fears: Understanding Perceived Risk. In Policy and Practice in Health and Safety (Vol. Supplement, pp. 65–67). https://doi.org/10.1007/978-1-4899-0445-4 Slovic, P., & Lichtenstein, S. (1983). American Economic Association Preference Reversals: A Broader Perspective Preference Reversals: A Broader Perspective. Source: The American Economic Review, 73(4), 596–605. Retrieved from http://www.jstor.org/stable/1816560 Slovic, P., & Peters, E. (2006). Risk perception and affect. , 15(6), 322-325. Current Directions in Psychological Science, 15(6), 322–325. https://doi.org/10.1177/03063127067078012 Sunstein, C. R., Zeckhauser, R., Sunstein, C. R., Zeckhauser, R., & Ramsey, F. P. (2011). Overreaction to Fearsome Risks. Environ Resource Econ, 48, 435–449. https://doi.org/10.1007/s10640-010-9449-3

  27. DISCLAIMER • This presentation has been prepared only for the recipient and date shown on the front page. It is not intended for any other persons and should not be relied upon by other persons. • This presentation has been prepared for information purposes only and is not a solicitation or an offer to buy or sell any security. It does not purport to be a complete description of our investment policy, markets or any securities referred to in the material. The information on which the presentation is based is deemed to be reliable, but we have not independently verified such information and we do not guarantee its accuracy or completeness. All expressions of opinion are subject to change without notice. Any reference to the Quilter Cheviot model portfolio, which is used for internal purposes, is purely illustrative and should not be relied upon. The figures quoted do not include charges. • Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return. You may not recover what you invest. Changes in exchange rates may have an adverse effect on the value, price or income of foreign currency denominated securities. Levels and bases of taxation can change. Investments or investment services referred to may not be suitable for all recipients. • Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London, WC2B 6AN. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority.

More Related