Money: The Greatest Gravitational Force Impacting Decision Making
I’ve asked many advisors over the past few years, "How much time do you truly spend understanding the emotional behavior of your clients?" On average, the consensus is about 10%.
I then ask, "How much time do you spend understanding your clients’ identity?" this question is met with a blank stare.
The reality is that we know very little about the behavior of our clients, and, consequently, how they make decisions. Making assumptions about who the client is and what their true motivations are is a risky approach. Ultimately, as advisors, our ability to objectively understand how our clients are uniquely "wired" and then building a corresponding healthy relationship with them represents 80% or more of our success on their behalf. And our own success is riding on theirs.
When you think about it, the behavioral dynamics start from the moment a prospect makes contact with your firm. Because of the digital world we live in, that could even be before the first meeting. Therefore, it's central to the ongoing success of the relationship to deliberately address behavioral differences early.
Deconstructing emotional decisions
Over the past few months, I have spoken to many industry leaders in what we call Identity Conversations. There is one consistent issue: How to work with clients who make emotional decisions.
All agree that money is the most significant gravitational force impacting decision-making and that there is no doubt that the emotional pull of money can hijack decision-making. The question is how to recognize what it is that triggers these emotional responses.
For me, there is no doubt that understanding identity is key to working with clients. Identity reflects their X factor and their unique algorithm, as well as their values and purpose. Unlock this, and you will know your clients' motivations, and this will reveal how and where and for what reason they want to build their wealth.
When market movements cause clients to become emotional, you will see what they are inherently trying to protect – their identity. That is the convergence of their talents, passions and life purpose.
Lessons from a challenging season
We don't know what the world will ultimately look like when this pandemic has left us (and it will). What will the economy look like? How will our working lives have changed? Will our priorities have changed? And perhaps the biggest one of all: What will we have all learned about ourselves and our decision-making approaches during this challenging season?
As advisors, industry leaders or individuals, it's time to prepare for what comes next. Check yourself before you wreck yourself: Figure out your own identity and those of key players around you. Form an opinion as to how the gravitational pull of money impacts your decision-making and prepare well for the next season via identity empowerment.
And if you are looking for a safe place to start an Identity Conversation, I’m always happy to help you kickstart such.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.