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Catering to your clients according to their demographic or life stage is a good starting point, but it’s no longer enough to establish loyalty.
The Lumiant app* taps into a smart and important way to keep financial advice clients motivated. It helps connect financial decisions to the unique life goals and events that matter to each individual and family – with the added benefit of shifting the focus to fulfilling aspirations, rather than investment outcomes.
From our extensive research into 450 Australians 18 years and older, we know that personalising advice in this way is important to client loyalty. We built the Netwealth Value for Money Model, which is based on behavioural science principles and defines over 80 drivers of value when it comes to why Australian’s use financial advice. We shared these value drivers and asked participants to rate their importance. One of the key findings was that people have a strong preference for advice that is highly tailored.
Whether your client is a newcomer to advice or a loyal client, we show what truly personalised advice looks like, so you can tap into their innate desire to feel understood and valued.
Goal-based advice
A fundamental step in personalisation is offering your clients goal-based advice. Much like in the Lumiant app, this approach links a client’s financial plans and investments to tangible objectives that really matter to them. This could be a car, a house deposit, travel, starting a business, paying school fees, or having funds for retirement, among countless other possibilities.
The theory is that by linking financial plans to specific events, it will help to increase motivation and reduce ‘temporal discounting’ – a behavioural science principle that gets in the way of success. In temporal discounting, people undervalue distant benefits while overvaluing more immediate rewards, making it harder to stick to plans and succeed at longer-term goals.
Our research found that well over half of clients want this type of goal-based advice, with the desire increasing as their tenure with an adviser increases. Goal-based advice was especially important for Loyals (advised over 6 years) with 74% valuing it, compared with 57% of Settled (advised 3-5 years), and 60% of Newcomers (advised under 3 years). (Figure 1)
A fundamental way to support clients with goal-based advice is to focus on life goals and the emotional experience that could come from fulfilling those goals. Another way is to co-create the plan, involving clients in planning by offering them options, educating them on the pros and cons, and then letting them make the final decisions, which for Loyals is especially valuable with almost half (48%) wanting their adviser to ‘value and act on their suggestion’.
A great example of this is the weight-loss app Second Nature,* which helps people form lasting health habits from personalised goals. Rather than dictating a diet, it focuses on the individual’s unique goals, values, and lifestyle to help create new habits.
Aligned investment options
Personal beliefs such as caring about the environment or supporting the community are increasingly key to people’s investment strategies. Aligning beliefs and investments taps into the powerful psychological principle of ‘identity alignment’, meaning that people engage more with things that reflect their sense of identity.
Much like goal-based advice, having aligned investment options becomes more valued by clients as the client/adviser relationship progresses. For example, six in 10 (59%) of Loyals say ‘recognising my investment preferences’ is important, compared to half of Newcomers (49%). (Figure 2)
To support your clients with aligned investments, schedule periodic reviews to understand clients’ evolving values. Highlight how investment choices align with their identity, such as being an ‘ethical investor’ or ‘community-focused steward’. Meanwhile, continually upgrade your knowledge of investment options, so you can present unique opportunities.
For those looking for more responsible investments, it will be important to not only provide financial results of the investment, but the impact of the investment itself, and how it helped achieve the specific goal that was intended.
Knowledge for empowerment
Giving your clients the right knowledge at the right level at the right time is an important step in personalisation. The behavioural science theory of ‘self-determination’ suggests that people are most motivated when they feel capable and in control of their choices. By providing targeted education at each stage of the client journey, you can boost these feelings. You can also leverage the behavioural science principle of ‘authority bias’, which means people tend to trust professionals who demonstrate deep experience in specialised areas.
A good example of tailoring advice is the Ellevest digital investment platform,* which tailors its content to US women’s unique financial needs. It features dedicated resources, content, and tools for women, building each client’s confidence and competence. The app also makes sure the information is simple and relevant, breaking down financial concepts into relatable, easy-to-digest articles and courses.
Our research shows that clients will value this effort. Over half of all clients want their adviser to ‘expand their financial horizons,’ while Newcomers (62%) are most likely to want autonomy and look for knowledge and education to ‘empower them with the confidence and tools to make autonomous decisions’. For Settled clients, 6 in 10 (59%) desire their adviser to ‘challenge their current thinking’. Meanwhile, Loyals want their adviser to ‘explain more complex financial concepts’ (59%) and offer educational events and materials (52%). (Figure 3)
Contributing to the world
Finally, personalisation is not just about advice, but the behavioural science principles of ‘social proof’. This is the tendency to conform to the actions or opinions of others, especially in uncertain situations, based on the assumption that others’ behaviour reflects the correct course.
The tricky part is working out what your clients value in terms of social proof, but there are some starting points. For example, Newcomers (47%) value an organisation that ‘has a positive role impacting the environment’, while for Settled (39%) and Loyals (44%) there is an interest in their adviser having a ‘positive impact in the community’. (Figure 4)
You can demonstrate your ability to offer responsible investment options, be part of impact investing networks, facilitate conversations with clients interested in responsible investing, and share case studies of other clients’ positive investments. You could support causes that matter to you and your clients, or invest in community impact funds that address social and economic challenges.
In summary – going beyond standard demographic or life-stage-based advice and ensuring your advice is hyper-personalised to your specific client needs can be done by embracing goal-based advice, aligning values with investments, sharing the right level of knowledge, and maximising ‘social proof’. This effort can help your clients be more engaged, step up their perception of your value, and lead to longer lasting and more successful relationships.
*Please note this is not an endorsement by Netwealth and we have used these as case studies for illustration purposes only.
