At the recent Personal Finance Society Festival of Financial Planning, I took part in a panel which discussed the topic of how to help clients make better financial decisions.

    The panel was led by Chris Budd of Ovation Finance and included eminent behavioural finance experts Neil Bage from Be-IQ and Greg Davies of Centapse.

    In front of an audience of 600 financial planners, we discussed the issue of bias in the client’s decision-making process, and how it can explain why clients can make poor, irrational choices. We also explored how advisers can help clients overcome those biases.

    I raised the challenge of recognising that advisers also have biases and how we need to explore how these play into the mix. An audience member then asked: “What is the single biggest bias advisers have?” Thinking on my feet, I used the term 'expert bias'.

    I’ve since researched this issue and given it a lot more thought. It’s a fascinating and very wide topic to delve into, not least because the term can be broken down into several elements that can all influence advisers' effectiveness when working with clients.

    Superiority view

    With so much knowledge and experience, experts can struggle to see the world from the same perspective as clients who don’t have the same degree of nuanced understanding. In these situations, they may lack empathy and lose patience with their clients, and even become irritable. The ego plays its part here too, feeding a sense of superiority that manifests itself in the way we interact. For example, we may get annoyed when clients don’t 'get it', or if and when they fill in the forms incorrectly!

    Pattern recognition

    Experts see many clients with similar issues. With experience we get better and better at quickly spotting patterns and recognising the right solution for the client. They become just like any other client that fits into a box you have consciously or subconsciously defined.

    But by short-cutting this part of the conversation, we may miss the opportunity to get to know the client fully, to understand their specific circumstances and to build rapport. By not working on a more nuanced basis, we can miss the chance to work towards reaching a solution directly related to the client’s individual objectives.

    The Dunning-Kruger effect

    The Dunning-Kruger effect refers to our ability to estimate our own skills, where non-experts tend to overestimate their own abilities while experts underestimate and don’t trust theirs.

    A real expert tends to understand there is so much more still to know about their subject, so they can go on an eternal quest to improve their technical specialist skills. The expert adviser may not then recognise their technical skills are more than sufficient already for their role, but other aspects should be their focus, such as interpersonal skills (where they may in fact have overinflated opinions about their own competencies).

    Believing in your own hype

    Certificate, diploma, chartered, fellow – they are great accolades. Within our profession these carry great significance, as your peers will recognise the effort, skills, expertise and time required to acquire these.

    But don’t be fooled into thinking it matters much to the layman client – for them it is just a minimum expectation that you are qualified. What counts a lot more is: Do I like and trust the adviser I entrust to manage my hard-earned money? Interpersonal skills are therefore far more important on a day-to-day level than qualifications.

    Arrogance

    There was a certain irony in the title of that panel discussion I participated in. 'Helping clients make better decisions' - who decides whether it is a better decision?

    We may as experts know one choice is rationally better than another. But presuming we know it is a 'better decision' for the client sounds somewhat arrogant. If a client decides something different from our ‘better answer', we should ask ourselves what lies behind it: Did we not get the full understanding of the client’s perspective and motivations? Should we have spent more time exploring this? Did we not present the options and facts in a way that was understandable for the client? Are we the one that is biased? This would be a much more humble approach – rather than assuming we know best – a classic expert bias.

    When we coach senior leaders we are often a sounding board for the critical decisions they need to make. These include strategic decisions, acquisitions, balancing risks with growth, the hiring and firing of key personnel, as well as their own personal career choices.

    As coaches our role is help them be as rational as possible and counter biases in their decision making, while being aware of how biases may influence our own ability to support our clients. It’s a constant journey and a real professional skill to recognise and counter these.

    Further details of our services in executive and business coaching are available here.
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