A look into the behavioural psychology side of finances, you will see that the management of personal finances is hardly purely rational.
Clients’ emotions, behaviours, values and changing circumstances such as health, life events, personal relationships, and goals all impact their motivation towards their finances and the achievement of their dreams.
There has been much discussion about the cross-section of IQ & EQ in financial advice and client relationships. As success and happiness are at the core of a client’s goals and aspirations, the combination of IQ & EQ is required. Tech innovation is fast supporting the integration of both IQ & EQ to deliver a more robust and quality client experience.
Because financial advice is about more than just a client’s financial position, it’s also about goal achievement and a client’s emotional and behavioural values: the actual value of advice comes in two distinct forms – tangible and intangible.
IQ stands for intelligence quotient, and, in short, is a measure of a person’s reasoning ability and how information & logic are used to answer questions or make predictions. Technology can boost an individual’s IQ through machine learning. Deep learning provides behavioural insight, analysis and predictions.
EQ stands for emotional intelligence (otherwise known as an emotional quotient) it is the ability to understand, use, and manage emotions in positive ways to relieve stress, effectively communicate, empathise, overcome challenges and defuse conflict. Emotional intelligence helps build stronger relationships and supports achieving goals. It can also help connect with feelings and make informed decisions about what matters most to an individual.
Modern AdviceTech now uses nonlinear algorithms to enable the modelling of any number of client goals, asset classes, risk, investment & retirement strategies, simulated with a mix of economic, regulatory, market and behavioural variables.
Interactive tech tools help simulate real-life situations, goals and objectives, like “what if” scenarios that illustrate how certain decisions will impact a clients’ ability to achieve their wealth objectives. Behind the scenes, sophisticated multi-dimensional modelling of client data helps advisers to have deep conversations around wealth creation, management, and the advice process’s value.
Advisers can proactively provide advice that meets clients’ changing circumstances to focus on certain behaviours that may need to be addressed through psychological profiling, as well as reviewing their spending, saving, and investing habits. Advisers are guided by what they can do from an empathy, priority and coaching perspective to help keep their clients on track toward achieving their goals.