If you don’t have a cat as a pet and even if the next two paragraphs might not mean much to you please persevere with me. I should add that I am not a natural animal lover but am more of an assistant to those around me that are. Nevertheless I find myself catering to every whim that our cat meows.
This includes opening the front door to let him look out before he decides to go outside, if at all. And there’s letting him back into the house when he jumps onto the kitchen windowsill and gives me those Doe like eyes similar to Puss in Boots in Shrek. Let’s not forget putting fresh food into his bowl when he decides that he doesn’t like the last portion put out earlier in the day.
Indeed, being a cat owner is part love and part duty. You react to the cat’s needs and whims and you know that you can’t complain because he really doesn’t care that much. You have an inviolable contract. He is your cat and you are his butler, for as long as he stays in your home. And even then you are not guaranteed that he is your cat. Like all cats he reserves the right to visit other homes close by and impose a lighter form of cat and butler on them as well especially when it comes to being fed and mollified in general.
As a financial planner, it strikes me that cats and clients have much in common. Indeed, the client and adviser analogy extends to any advisory relationship and not just those based in financial advice. There are moments when we really enjoy their company and their conduct and then there are other moments that we’d rather not talk about. Sometimes these incompatible moments arise as a result of mismatched objectives. The cat moves you out of your comfort zone at times when you least expect it. The client assumes that you must always put them first irrespective of what’s going on.
At the heart of all this is the understanding of behaviour and making allowances for the others’ actions. This applies equally to both the client and adviser. As a financial planner I need to understand what motivates my client and how they think. What makes them happy and what causes them discomfort. If this discomfort causes them concern, I must consider that they might stray to another adviser. If anything, we need to be constantly aware that we only have our client (or cat) for as long as they so wish. Above all, I need to understand that their rules of behaviour may be totally different to mine.
As someone who has been aware for a long time of the impact of behaviour on financial matters this whole area has been of real interest to me. Now it seems it is becoming one of real interest to the wider financial community. In April 2013, the UK financial regulator, the Financial Conduct Authority (FCA), published a ground breaking paper on behavioural finance. Rather than just dismiss it as a one off document, the FCA has gone further by being involved in a major behavioural finance conference. For this the FCA is not only to be praised but also acknowledged as leading the way for behavioural finance worldwide, especially among the regulatory community.
And it’s not just the FCA that is to the forefront in this area. Major international financial institutions ranging from the UK to Canada and Australia are applying huge monetary resources to understanding their clients better. Many have established particular behavioural finance units to specialise in this area and, in so doing, give them an edge in client advice. This is to be welcomed as it places the client at the forefront of advice rather than the past history of selling product first and assuming, or hoping, that it will fit.
Indeed, behavioural finance is becoming, for many in the financial advisory community, the missing piece of the jigsaw when it comes to imparting advice. By understanding our clients’ financial preferences, whether these are investment risk, savings or spending habits, attitudes towards trust or financial control, budgeting or the pursuit of financial objectives we, as advisers, are better placed to serve our clients as they aspire to achieve their goals in life.
By having our clients understand themselves better and acknowledge their own behaviours the client – adviser relationship benefits immensely. The advice should become not only a better fit for purpose but it is also understandable in the context of each individual. Money and behaviour are aligned and both parties are happy with each other. This helps to consolidate the relationship for the future as trust is deepened and a focus is put on achieving long term objectives. And this is the real thrust of good financial planning namely, to develop strategies to assist clients in managing their financial affairs to meet life goals.
Now if only I could get my cat to understand the behavioural aspect of that.