Video A human-centric approach to financial advice

(00:08): Hi, and thank you for joining on this CPD hub of Aegon. We have loads of content that will help you with the technical side of financial advice, be it market outlook related things, compliance considerations, tax-related webinars and so on. The educational content that comes from me and Money:Mindshift is a bit different. We believe that financial planning isn't just a technical exercise, it's a human one, and it's shaped by values, by emotions and the lives people actually want to lead. So this here is an overview session that I run that paved the way for much more granular educational content that is to follow on the human-centric initial meeting, the human-centric planning meeting, the human-centric cleint review meeting meeting, the human-centric client review meeting for long-term clients, and lastly, the human-centric referrals management system. So this here is an overview session, and here I'm going to cover a few basics.

(01:24): I will reflect briefly on what people are looking for when they're seeking financial advice, and I contrast this with why they really do seek financial advice. I then offer some reflections on what it actually means in the first place to be human-centric. And in an initial practice part, I look at some questions you can ask at different stages in the client adviser journey. And I will reflect briefly on listening skills as well. And as I said, this is content that will pave the way for more granular educational content that is to follow. So let's start with this seemingly simple and banal question. Why is it that people actually seek financial advice? Now, when we ask ourselves this question, it is very, you know, easy to find the obvious answers. Things like, you know, tax planning, retirement planning, inheritance planning, all those things that you see here on this page. You ask this question and you're sort of engaging the cognitive side of the brain. You are giving the plausible answers to this question. And you know what? It's of course true, right? I mean, these are the utilitarian reasons, the objective reasons for why people seek financial advice in the first place.

(02:59): But I will challenge you in that I believe that the vast majority of clients, when you meet them the first time, they won't say something like this, right? They won't say something like, I aim to accumulate a certain amount of money by a certain point with a certain investment strategy. That's rather unlikely that people will say this. And it is much more likely that people instead will say something like what you find here on this page, right? So they're much more likely to express anxieties. They're perhaps indicating that they are overwhelmed. They are perhaps saying that there are you know, that they suffer from analysis paralysis. Perhaps they're just wanting to offload unpleasant things. Perhaps they are wanting to save time. Perhaps they're wanting to do someone else a favor, perhaps. You know, there's, there's multiple reasons of the emotional drivers that make people seek financial advice in the first place.

(04:16): So this I think, is important to acknowledge that there are underlying, perhaps the obvious and utilitarian reasons for why people seek financial advice, those deeper emotional ones. I think also that oftentimes when people seek financial advice, they are wellbeing driven, right? So they want someone to think through the various trade-offs people have gotta make between their present selves and their future selves, right? I think this is really at the crux of the issue oftentimes nowadays. In fact, I believe this is the challenge of our times that we have to trade off financial security of the present self with financial security of the future self, but also, you know, the happy life of the present self versus the happy life of the future self, right? I think this is, this is an awfully complicated trade off, and you see this when, you know, younger folk make the decision on whether or not to bring the children into nursery or go working even though, you know, the income they earn at work just pays off the nursery fees.

(05:32): Or when people in their forties contemplate whether or not they should re-educate when perhaps they're feeling as though the job they're currently in isn't very sustainable. Or if people have I don't know, elderly relatives to take care of, and they're contemplating, how am I reconciling that with work. Yeah, the elderly care commitments, et cetera, all those things. So I think these are just some examples of trade-offs people make between present self and future self. And oftentimes I think people seek financial advice to help them with those trade-offs. This is what I mean with wellbeing oriented goals that people oftentimes have. And I think the reason this is important to acknowledge is because I think we have an assumption that people really are all those things that we have here on the left-hand side, right?

(06:37): I believe that we are oftentimes assuming that our clients are goal oriented, they're utility focused, they're rational decision makers, and they're future focused, okay? Goal oriented in the sense that, you know, they can express or they are as an adviser, you can help them express what their financial goals are. Yeah, things like 2 million by the age of 60, they are, we assume utility focused, right? So it's in relation to all those utilitarian needs that I had up there on the slide. We believe that they are rational decision makers in the sense that when we explain to them the different options there are and present information in a factually correct way, then you know, they will make the decision that is factually best for them, objectively best for them. And then lastly, we perhaps assume that they are future focused in the sense that it is just about achieving something in the distant future.

(07:39): But as I indicated, I don't think that is necessarily the case. I think they're much more values driven rather than goal oriented. Amy Mullen of Money Quotient, she said something nice on Daniel Crosby's Standard Deviation podcast. She said, there's no such thing as financial goals. There's only life goals with price tags attached. So this kind of goes into that direction of thinking. As I said, they're wellbeing oriented rather than utility focused. So they consider all sorts of things when seeking financial advice. They're not just cognitive by nature. I mean, this is the human makeup. To be human means to have emotion, cognition, and motivation work together in a complex way. And as I said before as well, it's not just about the future, it's also about the present or the other way around. It's not just about the present, it's also about the future. And this, as I indicated before, I think is the ultimate very difficult trade off that people have to make, and where I believe that financial advice really has a strong role to play.

(08:55): So on that note, let us briefly reflect what I actually mean when I speak of human centricity. And in order to get on top of this notion human centricity, I thought perhaps a good way to bring this notion to life is by contrasting human centricity with other types of tricities that you have here on this page, right? I won't go through all this in detail, so I invite you to hit the pause button and look at this in detail. But, probably the notion of what it means to be human-centric is evident when we reflect and ponder what the difference of human centricity may be to customer-centric or customer-centric or client-centric approach and a product-centric approach. In one of the webinars, I make the point that in my interpretation of legislation, UK financial services, regulation and legislation, I believe that a human-centric philosophy, if you will, has kind of been paved the way for with Consumer Duty.

(10:21): That's the latest one. So, you know, we had until 2007 or so, we were product-centric. And you know, what legislation was concerned about predominantly was, you know, the profitability, the risk structure, and all those things with regards to products. Yeah. So it was product centric legislation and regulation as well. Then in the aftermath, we had customer-centric legislation and regulation. So for example, Treating Customers Fairly, which was all about, you know, disclosing risks and being transparent about costs and all those things. Now, what I think is happening with Consumer Duty is it paves the way for a human-centric approach in the sense that we've got to acknowledge that the recipients of the products and the recipients of our services are humans. And what that means is we've got to appreciate that they have got instincts and emotions and vulnerabilities, and that context factors will perhaps impede them or perhaps enable them. All those things are now important to consider.

(11:53): A good example, perhaps, you know, when we disclosed costs or when we disclosed risks, perhaps 10 years ago in a more sort of customer-centric, client-centric approach, it would've been okay to send a 40 page document that discloses all the risks. And perhaps is very transparent and detailed about the costs. Because it's kind of, you know, it's there. So we're very transparent in the spirit of transparency, we just give it to you. So here, here you go. There it is, in a human-centric approach. However, you appreciate that people don't read 40 page documents. It's not a human thing to do. So we're not having the time, we hardly ever have the right context. We don't have the bandwidth we don't have the instincts to open such a letter, sit down and read a 40 page document, okay? So that, that's perhaps a good example for what it means to be human-centric versus customer-centric. Over the course of the webinars that follow this overview session, I will bring up a, an example of a financial plan of a one page financial plan that I think brings the notion of human centricity to life.

(12:56): Okay? So this is an example of a human centric financial plan. So a financial plan where the objective is not to beat inflation with your investments by accessing your portfolios, which is perhaps the sort of like classic alpha value proposition where, you know, the financial adviser believes that what they have to offer is a policy portfolio that beats the benchmark portfolio asset allocation costs. Okay? So this is the, this is the classic, perhaps product-centric, perhaps client-centric approach. And the product-centric and client-centric understanding of what it means to to, to offer value and to offer a financial plan. The human-centric approach will appreciate that the financial plan is there to satisfy those deeper emotional and wellbeing oriented goals that I spoke about initially. So what you see here, and I won't go into detail here much now in, in this particular session, but I will follow this up in the client review meeting session.

(14:02): But what you see here is in the centre, of course there are some financials, but then what the financials are linking to is their principles, or you can call it your centres or your values, whatever you want to call it. So what are the deeper values that are driving that client? Then yes, there are goals and they are more sort of like time limited, okay? So something where you can say, yeah, okay, I've achieved it now. But of course, goals are informed by deeper values or principles or centres whatever you want to call it. Then you see here an overview of where they are at the moment. And then you see also, and I think I will elaborate in another session on why I believe this is a good thing to do. An invitation to think about a financial wellbeing related goal in the next 18 months.

(14:53): Yeah, as I say, I will elaborate on why I believe this is a good thing to do. The, the one reflection I perhaps invite you on now is many advisers tell me that once they retire, people have a real hard time spending the money they've accumulated over the years. And one of the reasons why I believe having a spending goal or financial wellbeing related goal in the next 18 months is so as to practice spending a little bit as well, okay? As I say, I will delve on this a little bit later on. So let us briefly look at what does it mean to be human centric? And this is the practice part. And as I said a few times now, a practice part that paves the way for much more granular content that is to follow in other webinars that come out of me and my colleagues at Money:Mindshift.

(15:50): Before I look into questions you may want to ask at different points in the client adviser journey, I want you to reflect briefly on what it means to be a good listener, because I don't think that this listening is something that we have been taught necessarily. We're not by nature, typically good listeners, and the environment we're living in also doesn't encourage us, especially well to be good listeners. So I have here this 80 20 rule of thumb that comes from Brendan Frazier and his beautiful the Human Side of Money podcast. I learned a lot from Brendan as well as others like Daniel Crosby, Neil Bage, Brian Portnoy et cetera when building these courses. But what Brendan invites you to think about is the amount of time you're spending talking and the amount of time you're spending listening and encourages you to listen 80% of the time and only speak 20% of the time.

(16:58): Now, what I invite you to think about as well is that there are different levels of listening. Yeah. There is listening to wait for an opportunity to speak, which is what we're typically doing. Then there is more active listening, which really tries to gather what is being said at a deeper level and what is also being said or what is not being said. Yeah. So there's much more to uncover when you look especially into those last pieces. Like what is also being said when someone says something or what is not being said when someone says this, and I will go into this in more detail in the first webinar on the human-centric initial meeting where I speak about this four sides model of Friedemann Schuliz von Thun, where Thun essentially says that to every statement that is being expressed, there are four sides to it.

(18:00): Yeah. There is a factual piece of information, which we're always very quick to identify, but then there is a piece of self revelation, there is a relationship message in there, and then there is an appeal as well. And I have here on this page an example of what this could mean in practice when someone says, I would like to know when I can retire. Yeah. So there is a factual piece of information of course, in this statement, and we are perhaps very quick to identify this. And we're perhaps very quick jumping on that and drawing all sorts of conclusions in terms of, okay, well, you know, show me your retirement savings, show me your investment strategy, show me your contribution rates, et cetera, all those things. But my suggestion would be that before you jump into that, you try to understand, well, when someone says this, what exactly are they saying?

(19:04): What are they also saying? And what, what exactly is the relationship message here? What exactly may the appeal be, et cetera, because it may not actually be what is being said or what is being suggested when they say, I would like to know when I can retire. The point here is that if you hear something like that, there's actually a lot to uncover and it paves the way for asking many more questions that help you understand what are the deeper drivers, you know, the, the emotional, educational, social, as well as utilitarian needs that are underlying this particular statement. Now, this is another thing that I will elaborate on in the human-centric fact find meeting that when listening, I believe it is very important to pay attention to the things they say give them a sense of pleasure and that give them a sense of purpose.

(20:07): This is a understanding of happiness that is very much inspired by Professor Paul Dolan, a behavioural scientist at the London School of Economics, who really says that happiness is a sort of even balance of activities, things, experiences that give you pleasure and experiences, things, activities that give you purpose. So on the one hand, it's about the things, activities, experiences that give you joy, that give you relaxation, that give you gratification. Yeah. And on the other hand, it's about things, experiences, and activities that give you a sense of feeling competent and feeling worthwhile and feeling useful, et cetera, all those things, right? And what he says is that really you want to have an even balance of the two of pleasure and of purpose. And I would invite you to, when listening to what the client says, the prospective client or in a client review meeting, when you actually perhaps know the client, stay curious and listen to what they say brings them purpose and brings them pleasure.

(21:23): Yeah. And an important other sort of lens to apply when filtering for pleasure moments and purpose moments is what do they experience versus what do they evaluate? Again, this comes from Professor Paul Dolan. And the example perhaps is you know, you may say that you like being a board member as an example, right? Because it sounds good. Yeah. And you know, with it comes a certain status and it sounds plausible that someone of a certain status would enjoy being a board member, but you know, the way they talk about it may actually be indicative of the board member job perhaps being you know, a drain and being a burden and you know, not actually helping the client living a good life. You know, perhaps they just say it because it sounds good. I think, you know, I think we do this all the time.

(22:29): We perhaps stay in a relationship or perhaps we pursue hobbies because we think it is important to be creative. We say it's important to be creative, but actually the experience of playing the piano or whatever every time you know is, is actually bad. Okay? So, so this is an example of evaluation versus experience. So be mindful of that and focus on the experience, focus on when they experience pleasure moments and when they experience purpose moments. The other thing that I think is really important when you listen to your clients, prospective clients and how they present themselves is their time horizon. Again, I will elaborate on this in the fact-find meeting webinar, but it is important to have an understanding of the mental time horizon when typically I think there's a big contrast between how the time horizon of the industry, so that includes financial advisers or long-term savings providers like Aegon. Insurance companies, perhaps, you know, we are long-term thinkers in the sense that we understand how compound interest works.

(23:41): We understand why it is worthwhile sitting out market volatility. We understand why there may be long-term benefits of taking out critical illness, insurance, et cetera, all those things. Yeah. So we are thinking in terms of 10, 15, 20, perhaps even further time horizons. Clients oftentimes struggle to be thinking about what's up after the summer holidays or after Christmas or after in a year's time. Okay? Mental time horizons typically are much shorter. And one of the things you want to understand is how when they speak about the future, how far into the future do they think and help them make that future more meaningful so that they can connect to a version of their future self in an intrinsically motivated way. I'll just leave it at that. As I say in one of the further webinars, I will elaborate on that a little bit.

(24:37): So let's now look into very quick examples of questions you may want to ask at different points in the client and adviser journey. And what I do here first is I look into questions you may want to ask at the initial meeting when meeting a prospect. And the first question I invite you to think about is what brought you in today as the very first opening question. And I will explain briefly why I think it's a better question to ask than what, how can I help? And the reason I think what, what brought you in today is a better question is because it invites the client, or the prospective client at that stage, to start wherever they want to start, right? If you asked as a financial adviser, how can I help? The prospective client will go, well, here I'm sitting with a financial adviser, what else should I be talking about than money?

(25:39): Okay? You don't not necessarily want to speak about money or their investments or their financial situation in general, you want to be inviting data on the drivers that really brought them in, right? And they may be financial, but they may be educational, they may be social, they may be emotional. So you want to understand that. And I think by asking this very open question, what brought you in today? You're inviting that type of data. Secondly, you ask why. Now, this is a good example from Brendan Frazier. A tangible recommendation from Brendan Frazier. Why now? And the reason for that is that the fact is you're sitting here in that meeting with them now, okay? You're not sitting here with them a week ago or a month ago or a year ago or not in a week's time, or not in a month's time, or not in a year's time.

(26:35): You're sitting them in this meeting now. So you want to understand why. So again, I think it's probably a good way of understanding what drivers are and gathering that data. And then the last question here is, if we worked together, what would success in one year's time look like? And I believe the reason this is a good question is because it helps you to set expectations. To understand what is it the client really wants? And you want to understand whether what the client wants is aligning or alignable, if that's a word, with what you are wanting to deliver in the relationship. Okay? So we speak about this in the initial meeting webinar. The purpose of the initial meeting really is to understand whether the client is a good match for what you're wanting to do for the relationship you want to enter.

(27:34): If the client isn't a good match, yeah. Then this is something that you want to disclose and where perhaps you want to consider to not enter the relationship in the first place. These are questions that help you understand whether the client is in fact a good match. And that, that last question is a particular good one. So it's to understand, do expectations align? Now let's look into something that we are suggesting for a client review meeting with long-term clients. So in this series of webinars that we're preparing here for the Money:Mindshift, there are webinars on the client review meeting and the client review meeting for long-term clients. And the latter we are suggesting, because you don't want to offer an always sort of samey, samey experience, you perhaps want to land something that surprises them a little bit, and that rejuvenates the relationship a little bit after a while when perhaps after a while, and that's perfectly normal, the relationship goes a little stale

(28:35): So what we're suggesting you do is a type of session that we call the hopes and fears. And this is twofold. You will firstly invite them in, in an opener of that particular meeting that of course you prepare them for and set expectations for, but in the first part of that meeting, you invite them to reflect what they are glad for, what they did. So you see this here, we have an example of a client who today is 45, and you ask them, what are you glad you did? For you know, where you are. And then once you have that information, you ask them the question, well, now let's look out in 15 years time, what will you be glad you did? Okay, so, and this is, there's a few things happening here, but I think so of, of course it trains mental time horizon, but of course it also really invites them to think in a, you know, intrinsically motivated way about the needs and wants and requirements, perhaps also concerns of the future self.

(29:54): You can ask yourself that question. I think these are tremendous questions to ask. And what you see here as well, this is titled the 100 year life. This is very much the philosophical super structure, if you will, of all the webinars here. So the 100 year life notion has been coined by Linda Gratton and Andrew Scott. And it is not just highlighting the fact that we as a group of humans become older, but it's also to highlight the fact that we are not just living three stage lives anymore, three stage lives comprised of, you know, education, work and retirement. It's much more multi-stage lives where you still have education in the beginning and retirement in the end, but what exactly retirement is, you know, I mean, it's different things for different people, but crucially, the point in between the, the period in between of work, you have a first career, a second career, a third career. In between, you have transition points.

(30:56): Perhaps you're forced out of a job, perhaps you're losing interest in a job. Perhaps you're wanting to take time out to take care of children. Perhaps you're needing to take time out to care for an elderly relative, et cetera. All those things. Okay? These are, I think, new realities. And this is being summarized with the 100 year life and the multi-stage life. And this really is important when we're making all those trade-offs between present self and future self, and is something that we are considering when we are asking this question, what are you glad you did? And what will you be glad you did? When what we believe is, is really important for a successful long life, including, you know, the Second 50 of your 100 year life as to name the name of the campaign that brings to life the thinking.

(31:52): We believe that other components then wealth are important, really. So it's not just the financial side is also health, it's family, it's it's purpose, it is wellbeing. All those things. They're equally important, okay? And again, that is, that is that these are variables that are very much informed by the thinking that comes out of Lynda Gratton and Andrew Scott. So what we suggest then in the second part of that meeting is now that you have built the connection to the future self, you're wanting to systematically ask about the client's hopes and fears in relation to those five variables in relation to health, in relation to wealth, in relation to family, in relation to work, and in relation to wellbeing. And here you have an example of what this may look like once you have completed this. So in relation to health, I let you pause here again and read this entire script - I'll just pick up the example of health.

(32:55): In relation to health. Someone may say today at 45, they may say, I hope that at age 60 I'll still be fit enough to go hiking at weekends. But they may say that their fears on the other hand may be that they worry about burning out at work if they keep working these long hours. Okay? So, so here you see that, that contrast and you can perhaps see how this would inform a financial plan or very much perhaps verify that what the financial plan does is address all those hopes and fears. But perhaps, you know, if you find at the end of the session that there is potential to adapt the plan as a result of knowing now these hopes and fears, then that is very much an outcome of that particular session.

(33:53): Right? I stop here. Thank you very much for listening. This is CPDable content. So I will very quick just run through the learning outcomes. I reflected briefly in the beginning why people seek financial advice, and I offered that contrast with why they really seek financial advice, highlighting that there are utilitarian needs, but also non-utilitarian needs. I also brought to life a little bit what it means to be human-centric by contrasting it with a customer-centric and a product-centric approach. And then lastly, I looked into some ideas of how a human-centric approach can be applied in practice by reflecting on listening and what you want to be listening for when you are listening and how you want to be listening. And lastly, I gave a couple of examples of questions you may want to ask at different points in the client adviser journey. As I said, this is paving the way for more webinars where we are looking at all these types of meetings in a much more granular way. So I hope this has sparked a bit of interest, and you find the other materials the other webinars here on the CPD hub. Look out for content that comes from Money:Mindshift. Thank you for watching.