Applying behavioural science to the client acquisition process and the provision of advice can have considerable benefits, according to Behavioural Finance Australia (BFA).
Behavioural Finance Australia director Simon Russell said working with the automatic neural associations and mental shortcuts of clients can assist them to see the benefit of advice being offered. Mr Russell said the use of behavioural science also has “significant implications” for the fact finding process with clients, particularly with risk profiling “given the breadth of factors than can influence someone’s perception of risk, return and probability”.Behavioural insights, said Mr Russell, have four main benefits, including acquiring more clients, understanding clients better, providing additional value-added services and better influencing clients to act on advice. “Ultimately this should lead to better outcomes for both clients and their advisers,” he said. According to Behavioural Finance Australia, this area of psychology is increasingly entering the mainstream, with ASIC transitioning to regulation for what it regards as ‘normal people’ and away from the traditional ‘rational’ investor view. ASIC commissioner John Price said “many regulators around the world are now looking to behavioural science to better understand how investors really behave”, according to a BFA statement.
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