Home >

Behavioural Advice Alpha >



What kind of help are clients looking for?

As replete with anxiety and bad money habits as Australians may be, we are at least self-aware. When respondents to a survey by the University of Melbourne13 were asked about their biggest financial regrets, the top 5 all related to the absence of behaviours known to be drivers of financial wellbeing, as mentioned above.

Table 3 Biggest financial regrets


% of total sample

Not saving enough


Not investing enough


Not budgeting/planning enough


Not learning about money


Spending beyond my means


Source: University of Melbourne

These findings are also consistent with ING/RiceWarner14 research which examined advice needs as self-identified by a cross-generational sample.

Figure 3 What advice would you/do you value more highly?

01  Budgeting and case flow management
02  Retirement Planning
03  Financial Coaching
04  Holistic Planning
05  Aged care support
06  Other

Amongst the key take outs for advisers from this research:

01  The demand for help with budgeting and cash flow management advice was strong across all generations
02  The demand for financial coaching was particularly strong for younger generations but was also appealing to around 1 in 5 Gen Xers.

To the extent neither of these services would currently be considered mainstream elements of the financial advice proposition and relate more to coaching and guiding than traditional product solution advice, this represents a significant unmet need amongst consumers, and an exciting opportunity for advisers.

Advice alpha and behavioural coaching

Numerous studies have sought to quantify the value of advice, usually in terms of extra wealth accumulated, tax saved, or investment performance improvements.

Coredata/AFA15 research proved beyond doubt advised clients generally pay less tax, have less bad debt, generate greater lifetime income, and earn a higher return on their investments.

In its recent ‘Future of Advice’ paper16 , the Financial Services Council highlighted its own 2011 findings that that the provision of savings advice would lead to an individual being between $29,000 and $91,000 better off at the point of retirement, as well as survey-based research conducted in 2014 that demonstrated that investors who received advice over:

01  The demand for help with budgeting and cash flow management advice was strong across all generations
02  The demand for financial coaching was particularly strong for younger generations but was also appealing to around 1 in 5 Gen Xers.

The value of behavioural coaching

A number of studies17 have concluded that behavioural coaching can add 1-2% net annual return to a client, around twice that attributed to asset allocation, and 6 times that from portfolio rebalancing.

The benefits of financial advice aren’t just financial

The FSC Future of Advice Report notes several studies which have observed the positive mental health benefit of financial advice.

These include the IOOF research18 which found those who receive ongoing financial advice experienced 13% greater levels of overall happiness, a 21% increase in peace of mind, and were 19% less likely to have arguments with loved ones.

Rather than this solely being an outcome of accumulating more wealth, however, it is clear that aspects of advice, and the advice process, trigger deep seated drivers of psychological wellbeing

According to Six factor model of Psychological Wellbeing19 , the drivers of psychological well-are autonomy, environmental mastery, personal growth, positive relations with others, purpose in life, and self-acceptance.

Two of these drivers in particular –environmental mastery and positive relationships – have strong alignment with the process and outcomes of financial advice.

Financial advice increases environmental mastery

A sense of control or mastery over one’s life is linked to improved mental health20,21 , including reduced anxiety and depression, increase resilience and enhanced life satisfaction and well-being.

A QUT study22 found, across multiple surveys, that the majority of clients viewed financial advice as making a positive contribution to a range of psychological well-being factors, including sense of sense of security, peace of mind and a sense of control.

Financial advice builds positive relationships

Financial advice is built upon is trust-based relationships.

Discussing personal financial assets, personal life goals, and articulating plans for achieving those goals relies also relies on trust, candour, and a client’s willingness to be open and potentially vulnerable.

Clients who ordinarily wouldn’t dream of seeking out a counsellor or therapist will find themselves talking to their financial adviser about incredibly personal and emotionally charge topics such as a pending divorce, the aftermath of losing a loved one, caring for a special needs family member, or leaving a bequest.

Thus, financial advisers, whether they planned for it or not, may become personal coaches and counsellors for their clients, providing therapeutic value, perhaps without even realising it.

The extent to which Australian advisers are already having mentoring/counselling conversations with their clients is discussed in more detail later in this paper.

Advice processes also drive wellbeing

Aspects of the financial planning process itself, including goal setting, and even regular reviews of progress, can also improve mental wellbeing.

Setting goals makes us happy

The setting and achieving of goals are at the heart of financial advice.

Research23 suggests that participating in activities aimed at developing goal setting can increase subjective well-being and personal growth over time (in particular, life satisfaction), either by bringing about changes in self-perception and/or self-confidence, or by positive changes in one’s circumstances. Planning for goals is also associated with a greater sense of control, and fulfilling plans underpins competence and capability.

Review meetings also have a wellbeing effect

While successfully achieving goals has a distinctly positive psychological effect, a positive mood state is also associated with the mere anticipation of future outcomes. In other words, just the perception of progress towards goals can provide a positive psychological boost, ahead of those goals being reached24. This suggests the regular client review process has a vital psychological benefit.

Financial Advice

To find out more about Milford


How Australians feel about their finances and financial services providers, C. Breidbach, C. Culnane, A. Godwin, C. Murawski & C. Sear, the University of Melbourne, Melbourne, 2019.


My Generation, behaviours and attitudes towards money, financial advice and retirement, ING and Rice Warner, January 2019.


Value of Advice 2018, Report published by Coredata and Association of Financial Advisers.


Future of Advice Report, Financial Services Council and Rice Warner, August 2020.


Putting a value on your value, quantifying Vanguard adviser’s alpha, Vanguard Research, March 2019.


The True Value of Advice Survey, IOOF, 2015.


Happiness is everything, or is it? Explorations on the meaning of psychological wellbeing, C. Ryff, Journal of Personality and Social Psychology, 1989.


Daily psychological adjustment and planfulness of day-to-day behaviour, J.B. Nezlek, Journal of Social and Clinical Psychology, vol.20, no.4, 2001.


Know thyself and become what you are: A eudemonic approach to psychological wellbeing, C. Ryff & B.H. Singer, Journal of Happiness Studies, vol.9, 2008.


The Value of Financial Planning Advice: Process and Outcome Effects on Consumer Well-being, C. Newton, S. Corones, K. Irving & D. Thomas, Queensland University of Technology Business School Research Project in Partnership with the Financial Services Council, 2015.


Personal goals and psychological growth: Testing an intervention to enhance goal attainment and personality integration, K.M. Sheldon, T. Kasser, K. Smith & T. Share, Journal of Personality, vol.70, no.1, 2002.


Increasing well-being through teaching goalsetting and planning skills: Results of a brief intervention, A.K. MacLeod, E. Coates & J. Hetherton, Journal of Happiness Studies, vol.9, 2008.

Explore more

© 2021 Copyright XY Adviser