“Evidence shows that the presence of an expert can change the very way our brains process information.”
I read Dr Moira Somers’ book 'Advice that Sticks' last week and this sentence stuck out for me as an obvious thing I hadn’t known before.
In my work acting for clients with complaints about the financial advice they had received, or the products they had invested in, they consistently berated themselves for not having asked more questions of their adviser, and not having understood the product in more detail before they invested in it. Yet the neuroscience suggests that an adviser’s recognised status as a financial expert could be (at least in part) what’s thwarting clients from engaging in such critical thinking.
How many of your clients actively ask questions when you advise them? I suspect your client base contains folks at both ends of the information-seeking spectrum: those who ask detailed questions at all times of the day and night, and those who would unquestioningly sign pretty much any piece of paper you put in front of them. Either way, many may only start asking questions when the markets are down and they become worried about their finances. If you knew your clients were only passively receiving information from you without really thinking about it, would you have different conversations with them?
I was sufficiently curious about how professionals can have better conversations with their clients and engage them that I contacted Dr Somers to ask her. Following is a summary of that conversation.
What’s happening in clients’ brains when they talk to an expert?
It’s not necessarily what you think. Neuroimaging studies have demonstrated that being in the presence of presumed experts can change neural processing. Most notably, areas of the brain involved in critical appraisal, in actively weighing the pros and cons of various options, tend to go offline when outside expertise is available.
Why does this happen?
A few moments of personal reflection on our own experience as an advice-seeker can be instructive. One of the main reasons we seek out expert advice in any domain – from finance to medicine to cybersecurity to car repair – is to experience a reduction in complexity and cognitive overload. We want someone else’s years of study and professional experience to be brought to bear on our burning questions and concerns. Even if it’s never explicitly asked, the question, “What would YOU do if you were me?” is the one we want answered.
When does it become a problem?
Most of us tend to operate under a few crucial assumptions when receiving expert advice. These include: 1) the recommendations are technically sound, 2) the expert knows all that should be known about me, my situation, and my goals and concerns, and 3) the expert’s advice will be ethically solid and free of self-interest. Under the influence of such assumptions, we become less likely to actively appraise the suitability of the advice, to demand clarification on matters we don’t understand, or to disclose any new information that might reveal the unsuitability of the advice given. Clearly, there’s such a thing as too much passivity, too much trust, in being the recipient of advice.
What does this mean for us when we are on the other side of the desk, acting as the advice-giving professional?
We have to engage in a balancing act, of sorts. On the one hand, it’s our job to deliver on the client’s fundamental desires for less complexity and choice overload, for more action and associated peace of mind; obviously, we cannot require them to know what we know and to engage as our equals in terms of domain expertise. On the other hand, we still need to work hard at getting informed consent and at educating the client on the ‘must understand’ aspects of the professional relationship.
What are some top tips for advisers to ensure they’re gaining truly informed consent?
- All the best tips in this regard centre on the adoption of best communication practices:
- Have you trained yourself to speak plainly and avoid jargon?
- Do you provide written explanations to supplement your spoken recommendations?
- Are those materials written for people with non-financial backgrounds?
- Do you make a point of asking clients to explain back to you what you have recommended, and why?
- Have you explained the risks and benefits of various courses of action, and can they explain them back to you in return?
- Finally, do you make a point of asking if there’s anything important that you haven’t yet discovered or understood about them and their circumstances?
Turning to Consumer Duty, this falls squarely into the third of the four outcomes – consumer understanding and the Consumer Principle (Principle 12) “acting to deliver good outcomes for retail customers”.
We know – because study after study has told us, a plethora of books have been written on the subject and because we see it day to day – that people are not rational when it comes to money and this includes talking about money. If we are to make meaningful strides towards gaining informed consent from our clients and protecting you as advisers in the process, perhaps changing your conversation a little is a good place to start.
