The more we can connect with our future selves, whether by writing personal letters, using technology to expand our imagination or visualising our future lifestyle, the more we will be aligned with our financial objectives, and act accordingly when difficult times arise.
Remove the sludge
While financial advice can positively nudge clients towards making better financial decisions, it is also important that we consider any sludge within our industry, particularly when clients are navigating periods of volatility.
Risk of sludge can lead to inertia or cause clients to make poor decisions that they otherwise would not if provided with appropriate support and tools for their individual circumstances.
Ultimately, sludge hinders clients from taking action that would benefit them. For example, when markets are volatile, if clients are unable to quickly and easily evaluate the impact of the markets on their personal financial plan and objectives, they are more likely to make decisions in line with what they have observed in the media, which may harm their outcomes.
Rapidly shifting markets can be challenging, and so it is understandable that clients will have moments when they feel scared or anxious. This is even more the case when uncertainty persists or is resurgent.
The most important factor for client outcomes is how they then manage their reactions and decisions.
When clients are prepared for uncertainty by their advisers, kept up to date and given tools to help them control their emotions and build their confidence, they are then more able to remain resilient during difficult periods.
Louis Williams is head of psychology and behavioural insights at Dynamic Planner
