Financial planning is often viewed as a numbers game. But as explored in our Money:Mindshift webinar, The Psychology of Financial Advice, the reality is far more human.
For financial advisers, understanding how clients think, feel, and behave around money can be just as important as understanding investment performance or retirement projections. The ability to recognise emotional triggers, behavioural biases, and decision-making patterns can help strengthen client relationships, improve financial outcomes, and increase confidence during periods of market uncertainty.
From fear of missing out to our relationship with our future selves, the webinar highlighted how emotions, instincts, and deeply held beliefs influence financial decisions every day.
Here are six key takeaways from Dr. Tom’s session.
1. Financial decisions aren't purely rational
Financial advisers often see a robust plan backed by projections, data, and probability modelling. Clients, however, may see uncertainty, risk, and potential loss.
The key insight? People don't make decisions based on numbers alone. Their experiences, beliefs, fears, and emotions shape how they interpret information.
Successful advice is not just about explaining the maths. It's about understanding how clients feel about the story those numbers are telling.
2. What our instincts can teach us about money
Many financial behaviours can be traced back to instincts that once helped humans survive.
Three examples include:
- FOMO (fear of missing out): feeling pressured to act because others appear to be benefiting.
- Herd behaviour: following what everyone else is doing because it feels safer.
- Social comparison: measuring success against peers rather than personal goals.
These instincts may have helped our ancestors survive, but in investing they can drive poor decisions, particularly during periods of market excitement or uncertainty.
3. People aren't worried about money itself, they're worried about what money means
One of the webinar's most powerful insights was that money is rarely the real concern. Instead, money often represents something deeper, such as:
- Security
- Freedom
- Control
- Recognition
- Status
- Peace of mind
When someone says they're worried about money, they may actually be worried about what having, losing, or running out of money could mean for their future, identity, or family.
Understanding these underlying motivations leads to more meaningful financial conversations.
4. Market behaviour is often driven by emotion, not logic
The webinar explored the psychology behind different stages of the market cycle, from euphoria to panic.
During periods of growth, investors can become overconfident and take on more risk than intended. During downturns, fear can trigger reactive decisions such as selling investments at exactly the wrong time.
Several behavioural biases contribute to this, including:
- Loss aversion: losses feel more painful than gains feel rewarding.
- Present bias: immediate concerns outweigh future benefits.
- Action bias: taking action feels better than doing nothing, even when patience is the better choice.
The lesson is simple: market volatility is often less dangerous than the emotional reactions it triggers.
5. Our future selves can feel like strangers
Long-term planning is difficult because the brain doesn't naturally prioritise the future.
The webinar suggested that people often think about their future self in a similar way to how they think about another person. As a result, future goals can feel abstract and disconnected from today's decisions.
One way to overcome this is to make the future more vivid and personal. For example:
- Write a letter to your future self.
- Imagine a conversation with yourself 10 years from now.
- Visualise what everyday life might actually look like in retirement or later life.
The more real the future feels, the easier it becomes to make decisions that support it.
6. Better financial planning starts with self-awareness
The final takeaway was directed at advisers, but it's relevant for everyone.
Before understanding someone else's financial psychology, it's important to understand your own.
We all bring assumptions, biases, and emotional triggers into financial decision-making. Whether it's a tendency towards optimism, fear or comparison, greater self-awareness helps us make better choices and have better conversations.
Money psychology isn't just about understanding clients. It's about understanding ourselves.
The biggest barriers to financial success are often behavioural rather than technical. While strategies, products, and projections matter, emotions, beliefs, and instincts play an equally important role in shaping outcomes.
The webinar reinforced a powerful idea: money is a tool, but understanding how people think and feel about money is what helps them use that tool more effectively.
Missed the webinar?
Catch up on The Psychology of Financial Advice as part of the Money:Mindshift series to explore the behavioural science behind financial decision-making and discover practical ways to help clients stay focused, confident, and on track for the future.
Watch the webinar and explore more Money:Mindshift content on the adviser hub.