Mark, founder of Your Behavioural Economist, will speak about how decisions are made and how paraplanners might be underestimating the positive impact their advice might have.

I have always had an interest in what motivates us and how we make decisions. For many years I have been involved in rugby coaching and have achieved success with my local club by understanding the players' motivations, making the team greater than the sum of its parts and concentrating on the parts of the game that have the biggest impact. With amateur players, understanding where their sport fits with other areas of their lives that also demand their time and attention is important. Only then can you understand what would motivate someone to turn out and train on a cold wet January night.

There is much that business can learn from sport in general about motivation and preparation. Following a charity cycle ride around Britain in 2010, I helped to launch a charity ride that allows riders to complete all 21 stages of the Tour de France one week before the professionals, while raising money to help the hardest to reach kids turn their lives around through sports and arts projects. It gives amateur riders a chance to do the same route as the professional athletes and is now an annual event. As a novice rider attempting the challenge myself, I broke it down into manageable tasks, approaching it from the mindset of 80 two-hour rides rather than one 3,600km ride. This breakdown, plus understanding that it wasn’t just about the riding, helped me to complete the challenge.

A novice cyclist would be more likely to fail to complete the tour because of something they haven’t done after their day of cycling. Not eating properly, not washing thoroughly, not sleeping enough and not having everything ready for the next day causes problems when you have a 5.30am alarm set, a two-hour transfer, 180kms of riding and 4,500 metres of climbing ahead of you.

Business hygiene

The analogy between this and delivering advice is clear. Many businesses get into trouble not because their advice is wrong, but because of what they fail to do once their meeting has ended. It’s the hygiene factors, such as not recording the meeting properly, not following up as the client expects, or not servicing effectively.

‘Failed retirement’

Our combined sporting and business experiences at Your Behavioural Economist have enabled us to help professional sportspeople to plan for and transition into a life after professional sport. It would be difficult to do this effectively without an understanding of the mental journey involved.

Recognising how people feel is also important when advising those experiencing a ‘failed retirement’, where people fail to enjoy this time in their lives and often return to the workplace to re-engage. Considering the psychology of retirement, and that its very state is 'unnatural' to many, can help advisers have meaningful conversations. Shifting from purposeful work to leisure is often a recipe for disaster. The key is to retire to something not just from something.

Research has shown that people have two very creative periods in life. The disruptors in their early twenties intuitively see things differently. The reflectors, in their mid- to late-fifties, use their experience to see how things could be better and are in a position to make a purposeful contribution. Many people, including advisers, are considering retirement at what may be the most creative time in their lives. That deserves some serious thought, as many people could be missing out on some of their best and most purposeful work.

Behavioural economics and advisers

Economics and financial psychology are at the core of everything we do at Your Behavioural Economist. Many advisers still struggle to articulate their value, but we work to change that. Along with my long-term associate Paul Young, we have created an initiative called Adviser Delta, which measures the difference that taking advice makes. We looked at investment assets being held in the right names, ie the use of individual tax allowances, with the right ownership, ie the use of trusts, and in the most appropriate tax shelter. We looked at leveraging costs through scale, rebalancing and continued suitability and we looked at behavioural coaching. All these had a positive impact on client outcomes, but it was often the behavioural coaching that had the biggest positive effect. It shows that managing client behaviours is a core benefit in engaging an adviser.

We help advisers to understand their own psychology which, as well as being interesting, fun and of personal benefit, also helps their clients make better decisions. In my role as a doctoral college research psychologist at City, University of London I have conducted some initial research on personality characteristics of financial advisers and their own wellbeing and satisfaction with life, which includes a measure of their own sense of mastery, autonomy and their relation to others. I am looking to extend this research to the paraplanning community, which I will be speaking on at the Paraplanning Conference.

Our biases and heuristics may have helped us to evolve and become a dominant species, but they are not always of benefit when making financial choices. When people understand that we make bad decisions, not because we are stupid, but because we are wired to do so, then the advantages of having an adviser as a behavioural coach become evident. Any adviser who helped their clients through the financial crash of 2008 and explained that "I know it's scary. I know you just want it all to go away and you want to sell and get out, but you need to resist that urge and stay invested," will understand what this means. That one conversation might have done more for that client’s wealth than any tax shelter recommendation or platform choice.

Is it really holistic?

There is still a lot of misunderstanding of behavioural economics. A number of advisory firms claim to offer holistic financial planning, but when you break down what they do, it is just a series of numbers on spreadsheets, and people don’t make decisions based on numbers.

If an adviser is asking a client about their objectives and the answer is to travel around Europe in a camper van, if the next question the adviser asks is how much it will cost and when do you want to do it, then they have missed the point and are maybe trying to get to the answer too quickly.

There is a narrative behind the numbers, and the key to real financial coaching is to understand that narrative and the motivation behind the objective. When objectives are challenged, for example, by asking the client what is it that makes them want to travel around Europe, the conversations become meaningful and the real story is revealed. Knowing their motivations will help inform the financial plan in a truly holistic manner. This approach takes courage on the part of the adviser, and building the intimacy required is a skill, but real trust is hard to build without credibility, reliability and intimacy.