The interface between a human being and a volatile market is not a spreadsheet. It is a story.
It is 10:30 am on a Tuesday in Sydney. The ASX 200 has dropped 4 per cent in early trade, following a tech rout on the NASDAQ overnight. In boardrooms across Barangaroo and Collins Street, the phones are lighting up. On the other end of the line are clients, wealthy, successful, intelligent individuals, who are currently undergoing a physiological event that looks remarkably like a prey response. Their cortisol is spiking; their amygdala is hijacking their prefrontal cortex.
They want out. They want to sell.
The person answering that phone is a financial adviser. In the last decade, the industry has rewritten the job description for this moment. No longer stock pickers; that game has been commoditised by algorithms and low-cost ETFs. No longer just gatekeepers of access. Instead, the modern value proposition of wealth management has been rebranded as Behavioural Coaching.
The industry narrative goes like this: Humans are irrational actors plagued by cognitive bugs, loss aversion, recency bias, and mental accounting. The adviser’s role is to act as a behavioural circuit breaker, a pseudo-psychologist who manages the client’s behavioural alpha.
I have watched this pivot with a mixture of hope and deep concern. Hope, because acknowledging the human element is long overdue. Concern, because the vast majority of financial advisers are strictly unqualified to diagnose or treat the human mind.
We have confused diagnosis with interface design. We have confused psychology with communication.
When an adviser talks a client off the ledge during a market correction, they aren’t fixing the client’s cognitive wiring. That wiring, the Physis, or the organic, growing nature of the individual, is deep-seated and evolutionary. You cannot patch it with a quarterly review. What the adviser is actually doing is much more practical, yet strangely undervalued: they are designing a communication layer that allows a Stone Age brain to interact with a Space Age financial system without destroying itself.
It is time we stop pretending to be therapists and admit what we actually are: architects of narrative.
The death of Homo Economicus
To understand why the industry is currently obsessed with psychology, you have to look at the corpse of Homo Economicus. For most of the 20th century, standard economic theory assumed that market participants were rational agents who maximised utility.1 If you showed a client an efficient frontier, a curve representing the optimal portfolio for a given level of risk, they would logically choose the point that maximised their return. This was a comforting fiction. It allowed us to build beautiful mathematical models (Modern Portfolio Theory) and treat risk as a standard deviation number.
Then came Daniel Kahneman and Amos Tversky. Their work in the 1970s and 80s (Prospect Theory) shattered the rational actor model. They proved that humans feel the pain of a loss twice as intensely as the pleasure of an equivalent gain. They showed that we anchor on arbitrary numbers; that we judge probability based on how easily we can recall an event (availability heuristic), not on the statistical reality.
Suddenly, the financial adviser had a problem. Their spreadsheets were perfect, but their clients were broken.The industry’s response was to adopt the lexicon of the psychology department. We started profiling clients not just on their Risk Tolerance (a mathematical willingness to lose money) but on their Risk Composure (the emotional capacity to endure volatility). We started using terms like Behavioural Alpha, the excess return generated simply by preventing a client from doing something stupid at the wrong time.This was a smart commercial pivot.
Behavioural Coaching can’t beat the market, the adviser says, but I can save you from yourself.
The problem is that identifying a bias is not the same as treating it. And this is where the Australian advice landscape, in particular, has walked into a trap of its own making.
The Physis of the client
In my work, I frequently return to the concept of Physis. In ancient Greek philosophy, and later adapted by various schools of psychology, Physis refers to the organic nature of a thing, its internal drive to grow, become, and unfold.
A client’s Physis is not a static risk profile score out of 100. It is a complex, living web of past traumas, future aspirations, status anxiety, and survival instincts. When a client engages in irrational financial behaviour, like keeping $200,000 in cash earning zero interest while inflation runs at 4 per cent, they are not simply making a math error. They are satisfying a deep psychological need for safety or optionality that sits at the core of their being.
Financial advisers, however, are trained in a mechanistic worldview. They view the portfolio as a machine and the client’s emotions as friction or latency in the system. When a client wants to engage in mental accounting, separating their money into imaginary jars for Holiday, School Fees, and Retirement, the pure rationalist adviser sees this as inefficient. Money is fungible; a dollar is a dollar. Segregating it dampens the potential for total portfolio optimisation.
So, the adviser attempts to educate the bias out of the client. They show charts. They explain that time in the market beats timing the market. They appeal to logic.This is where the lack of psychological training becomes dangerous. You cannot logic someone out of a position they didn’t logic themselves into. Trying to suppress a client’s natural psychological defence mechanisms (their Physis) without understanding the root cause often leads to rupture.
The client nods in the meeting, then goes home and sells the portfolio anyway, or fires the adviser because they just don’t get me.
We are seeing a trend where advisers, armed with a weekend workshop on Active Listening and a copy of Thinking, Fast and Slow, believe they are equipped to rewire a client’s cognitive habits. This is the Dunning-Kruger effect in action. True psychological intervention requires breaking down defence mechanisms, analysing transference, and reshaping cognitive schemas. It is clinical work.
A financial adviser, whose primary fiduciary duty is the management of capital, has neither the time, the permission, nor the qualification to do this.
So, if we aren’t psychologists, what are we doing when we successfully stop a client from panic-selling?
We are framing.
Bucketing: The great communication hack
Let’s look at the Bucketing strategy, a staple of Australian retirement planning.
The premise is simple: You divide a retiree’s assets into three buckets.
- Bucket 1 is Cash (2 years of living expenses).
- Bucket 2 is Defensive/Fixed Income (3–5 years).
- Bucket 3 is Growth/Equities (7+ years).
The narrative pitch to the client is seductive: When the stock market crashes, you don’t need to worry, Mrs Smith. We won’t sell a single share from Bucket 3. You will just live off the cash in Bucket 1 until the market recovers.
This helps the client sleep at night. It is widely considered a triumph of behavioural finance.
But let’s look closer. Mathematically, rigorous bucketing can be sub-optimal. By holding large swathes of cash in Bucket 1 to soothe anxiety, you are creating a cash drag that lowers the long-term compounding of the portfolio. Furthermore, rebalancing these buckets can become a nightmare of tax inefficiency and transaction costs. From a pure Total Portfolio Variance perspective, a diversified, unitary portfolio often offers a better risk-adjusted return.
However, if you present a unitary portfolio to a client and say, “Your wealth dropped 15 per cent this year, but don’t worry, the standard deviation is within expected limits”, they will fire you.
Bucketing is not a wealth strategy; it is a communication tool.
It effectively uses the bias of mental accounting to fight the bias of loss aversion. It is a narrative device. It creates a user interface that hides the complexity of the engine room (the total portfolio volatility) and presents a simplified dashboard (the safe cash bucket) to the user.
When an adviser sets up buckets, they aren’t treating the client’s mental accounting bias. They are leaning into it. They are accepting that the client’s brain cannot handle the reality of a 60/40 split, so they wrap that reality in a story about time horizons.
This is distinct from psychology. A psychologist might help a patient understand why they have a pathological need for control that manifests in hoarding cash. An adviser simply says, “Here is a structure that gives you the illusion of control so we can keep your money invested in high-beta assets”.
That distinction matters. It means our skill set is not clinical; it is rhetorical.
The education gap
The disconnect between what advisers claim to do and what they are trained to do is stark. In Australia, the path to becoming an adviser has rightfully become more rigorous, requiring a relevant degree and a professional year. But the curriculum is still heavily weighted towards technical competence: tax law, compliance, superannuation legislation, and portfolio construction.
The human skills component is often relegated to soft-skill electives. We teach advisers how to calculate a Sharpe ratio to two decimal places, but we give them almost no framework for how to communicate that ratio to a person who is terrified of running out of money before they die.
I argue that Behavioural Finance, as applied in advice, is 90 per cent communication and 10 per cent actual psychology. Yet, we don’t teach rhetoric. We don’t teach storytelling. We don’t teach visual design or data visualisation. We teach the what (the math), and we vaguely gesture at the who (the client), but we ignore the how (the transmission of the idea).
When an adviser fails to connect with a client, it is rarely because the financial strategy was flawed. It is almost always because the translation layer failed. The adviser was speaking Finance, a dialect of probability and logic, while the client was listening in Human, a dialect of narrative and safety.
The adviser who thinks they are a psychologist tries to fix the client’s hearing. The adviser who understands they are a communicator simply changes the language.
The adviser as interface designer
If we strip away the pretension of therapy, we reveal a role that is actually more modern and perhaps more valuable. The financial adviser is the User Interface (UI) for the global markets. Think of the stock market as a backend code, raw, brutal, binary, and incredibly fast. It is a hostile environment for the average human. If you plug a human directly into the backend (day trading apps), they usually lose money because their emotional latency creates errors. The adviser’s job is to build a GUI (Graphical User Interface) that sits between the client and the market.
This interface consists of:
- Metaphors: Buckets, Anchors, Satellite positions. These are not financial terms; they are linguistic handles that allow the mind to grasp abstract concepts.
- Framing: Presenting a downturn not as a loss but as a sale on quality assets. This re-contextualises the fear response.
- Friction: Deliberately slowing down the decision-making process. When a client wants to sell, the adviser introduces procedural friction (meetings, paperwork, cooling-off periods). This is UX design for impulse control.
Let’s return to the Wealth Questions I pose to clients. Does the Growth Bucket actually have the alpha required to meet the objective, or is it just high-beta exposure?
This is a technical question. It requires a technical answer. But the delivery of that answer depends on the client’s Physis.
If the client is highly neurotic (in the Big Five personality trait sense), telling them Beta is high triggers anxiety. Telling them This bucket is designed to capture the upside of the recovery over ten years, which is why we dont touch it today frames the volatility as a feature of the bucket, not a bug of the portfolio.
The math hasn’t changed. The risk hasn’t changed. The communication has simply aligned with the user’s cognitive architecture.
The danger of pseudo-psychology
Why does this distinction matter? Why can’t we just keep calling it Behavioural Coaching? Because words create realities. When advisers believe they are practising psychology, they risk venturing into dangerous territory. I have seen advisers try to psychoanalyse a client’s divorce trauma to explain their spending habits. I have seen advisers dismiss valid client concerns as recency bias rather than addressing the flaw in the portfolio.
Labelling a client’s concern as a bias can be an act of dismissal. It creates a power dynamic where the adviser is the Rational Adult and the client is the Irrational Child. This is bad for the relationship, and it is bad for the advice.
Sometimes, the client isn’t suffering from loss aversion. Sometimes, the portfolio is just too risky for their life stage. Sometimes, the mental accounting of wanting to pay off the mortgage isnt a cognitive error; it’s a valid lifestyle choice that creates peace of mind, which is, after all, the ultimate form of wealth.
By retreating to the bias label, advisers often miss the nuance of the client’s actual goals. They become hammers looking for nails, seeing every objection as a psychological deficiency to be coached away.
The future: The chief communication officer
The future of wealth management in Australia does not lie in advisers becoming better amateur psychologists. It lies in their becoming world-class communicators.
We need to stop treating time frames as a proxy for risk management and start treating language as a tool for risk management.
Advisers need to understand that their primary value add is not the portfolio (which is a commodity), nor the strategy (which is largely formulaic). It is the translation.
When we frame the industry this way, the skillset changes. We stop obsessing over identifying which specific heuristic the client is suffering from, and we start obsessing over how to present data in a way that is intuitively graspable.
This means simpler statements of advice. It means visualising probability rather than listing percentages. It means using analogies that resonate with the client’s specific life experience (their Physis).
For example, I once observed an adviser struggling to explain sequencing risk to a retired engineer. The adviser kept talking about negative compounding in early accumulation phases. The engineer was glazing over. Finally, the adviser stopped. He knew the engineer loved sailing.
Imagine you are sailing from Sydney to Hobart, the adviser said. The average wind speed might be 15 knots. But if you hit a storm the moment you leave the heads, you might capsize before you even get into open water. Sequencing risk is just ensuring we don’t capsize in the harbour.
The engineer got it instantly. Was that psychology? No. The adviser didn’t treat the engineer’s fear. He didn’t analyse his childhood. He simply found the right metaphor. He built a better interface.
Conclusion
Wealth is not just a number on a screen. It is a feeling of capacity and agency.
The Australian advice landscape is right to embrace the human element. But we must be rigorous about what that means. We are dealing with the most complex system in the known universe, the human brain, interacting with the most complex system on Earth, the global economy.
To bridge the gap between the two, we don’t need more jargon about cognitive biases. We don’t need advisers playing Freud.
We need advisers who respect the mathematical realities of portfolio construction but understand that those realities must be sold, explained, and framed to a human being who is wired for survival, not for yield.
Bucketing is not a wealth strategy. It is a story we tell to make the math palatable. And that is fine. In fact, it is necessary.
But let’s stop calling it science. Let’s call it what it is: the art of high-stakes communication. The ability to look a terrified client in the eye when the market is red and tell them a story that allows them to hold on. That is not Behavioural Alpha. That is just good advice.
Ben Walsh, principal consultant, WealthVantage Partners
