Behavioural Financial Advice Is Not A Soft Skill

Behavioural Financial Advice Is Not A Soft Skill

With artificial intelligence and robo-advice expected to become a permanent feature of the financial planning landscape in the future, financial planners are going to have to offer clients skills that technology doesn’t have.

The good news is that humans will always be able to establish an emotional connection that artificial intelligence would be hard-pressed to achieve. Thus, financial planners need to begin redefining their roles to exploit their competitive advantage.

That’s where behavioural finance-based advice comes into play. But, you may ask, what is that? Behavioural finance-based advice relies on an understanding of a client’s motivations, expectations and, ultimately, behavior in finance and investing. This requires the financial planner to extend his ambit into the realm of psychology and people skills.

Incorporating behavioural finance insights into financial planning was the topic of the Humans Under Management (HUM) conference held in Cape Town in September. During the day, speakers and attendees engaged on how to build on the work that great advisers are doing in developing their behavioural finance practices.


Kim Potgieter, director at Chartered Wealth Solutions, spoke on why financial planning should not be an event, but, rather, a relationship full of courage, empathy and true connection. While some financial planners may dismiss these emotional attributes as nice-to-haves and not core to what they do when planning for the clients’ future, Potgieter highlighted how important these will be in setting clients up for future financial success.

She said that they will be needed even more going forward and that before a financial planner puts a plan together, they will need to understand how the client got to where they are and understand their principles and values. “We need to look at a client’s goals and dreams and work out how we enable them to have a life with more meaning.”

Potgieter said it takes courage to embrace the softer skills needed to become a successful financial planner of the future. These include vulnerability, empathy and connection. She explained that vulnerability is an emotion that the client experiences during times of risk and financial exposure. Often there is shame attached to money, she added.

The ability to empathise is a critical skill that financial planners will need to have, namely the ability to show the client they are available to help their client process emotions and help them not feel alone.

The emotional support extended to clients will enable financial planners to foster deep connections with their clients and give the financial planner the information they need to put a financial plan together that the client is asking for rather than the one the planner thinks they need.


Abraham Okusanya, Founder and Director of Finalytq and Timeline, shared his views on how to become an indispensable adviser in the face of a mounting global retirement challenge. He highlighted that the average person in 2019 will outlive their savings by 10 years. “If left to their own devices, on the current trajectory, the overwhelming majority are heading for a financial shortfall.”

He notes that most clients don’t understand the difference between risk and volatility – a problem most speakers highlighted on the day, including the founder of the HUM conference, Andy Hart.

Volatility is the day-to-day fluctuations in asset prices, which clients with a short-term focus or anxiety about their investments interpret as risk. On that basis, they consider equities to be high risk and cash low risk. However, as Hart pointed out, true risk is more difficult for clients to understand. If they avoid investing in equities because “they don’t want any risk in their portfolio”, they could well outlast their money because, as both Okusanya and Hart pointed out, equities are the asset class that give clients the best chance of meeting their retirement goals. Cash or money market assets, on the other hand, may seem risk-free but they expose investors to the risk of losing their purchasing power over time.

Hart noted: “There are various flavours of risk your client needs to know they are dancing with: loss of capital, which is the most dangerous flavor of risk; inflation, which undermines your purchasing power, and volatility, which is the friend of the financially literate but the enemy of the nervous investor.”

Okusanya pointed out that there are 400 known human biases that need to be managed and summed up the role of the financial adviser as: “Your job is not to manage the market but to manage your investor.” He advised finding a way to get investors more comfortable with volatility so that they can calmly get their minds back on the goals.

All the presentations at the HUM conference had one thing in common: the soft skills are undoubtedly going to be the hard skills in the future. As Rob Macdonald, Head of Strategic Advisory Services at Fundhouse and co-organiser of HUM SA pointed out in his presentation, financial planners who embrace these skills, and incorporate a coaching way of being into what they do, will help clients avoid making costly financial decisions when they are fearful about declining markets or going through difficult life transitions. Financial planners who successfully do this will have clients for life.

This article first appeared in Blue Chip Journal