How do you use behavioral finance concepts to give you an edge when competing for new clients or retaining existing clients?
A fascinating question asked and answered in a Monday morning session at the annual Excel 401(k): The Advisors’ Conference in Las Vegas.
DCIIA Retirement Research Center executive director Warren Cormier, former CEO and co-founder of Boston Research, was joined by Dimensional Fund Advisors’ vice president Austin Rosenthal for the presentation, aptly titled, “The Behavioral Economics Approach to Winning New Clients.”
“Always bring a gun to a knife fight,” Cormier noted by way of introduction. “The idea being that behavioral economics is the gun. Any military general will tell you they never look for a fair fight.”
“You’re always going into a battle looking for the advantage. That’s what this is about. We have several concepts that we will talk about to give you an edge.”
It involves a great deal of self-reflection, and analyzing the gap between how differentiated advisors think they are versus how differentiated they really are. Buyers tend to underweight differentiation, and sellers tend to overweight differentiation, in that they overestimate their own differentiation, he said.
Based on the work of behavioral economist Meir Statman at Santa Clara University, Cormier also discussed the concept of brand personality.
“What exactly is your brand personality. Do you have one? If not, you’d better get one, because that is the advantage to win and retain business.”
He concluded with a discussion of the role of trust, noting that “brand gets you to the battle, product features get you to the finals, but trust gets you to the winner’s circle. Most buyers are not qualified to immediately evaluate what they’re told, so it comes down to trust. Too many advisors are analytical and uncomfortable dealing with trust issues. They, therefore, stick to products, and are commoditized by doing so.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
