Equipping advisors to be better financial coaches

New course from Manulife Investment Management promises more productive client conversations with behavioural economics insights

Equipping advisors to be better financial coaches

Few professionals, even those with decades-long careers, have tasted the twin triumphs of applying their passion and working with a world-renowned organization. But that’s exactly what Catherine Milum, Head of Wealth Sales, Canada at Manulife Investment Management, has been able to do through the company’s partnership with BEworks.

“I've been passionate about behavioural economics and the psychology of the human mind in general for most of my career, which spans about 30 years,” Milum told Wealth Professional. “A few years ago, we entered into a partnership with BEworks; it’s based in Toronto and headed by Kelly Peters, who co-founded it along with Dan Ariely and Nina Mazar. That's taken my personal passion and interest to another level.”

Since 2010, the firm has established itself as the world’s first consulting firm that’s focused on the application of behavioural economics to real-world problems. Milum said she was able to elevate her knowledge with a customized course, which consisted of several day-long visits to the BEworks office spread out over a span of six months. It was taught by an array of scientists whose research and insights are well received at universities and other institutions of higher learning.

And now, Manulife Investment Management has opened the door for Canadian advisors to get a similar experience through a recently launched behavioural economics course. Developed with BEworks, it offers a deep dive into the science of investor behaviour, introducing learners to insights into how people’s financial decisions can be shaped by environment, context, and well-placed nudges.

“We designed it to take just about six hours, and advisors can access it online at their convenience,” Milum said. “I really believe it will be transformative to their practice.”

One way the course can help advisors, she said, is by reorienting them to the basics of how clients make financial decisions. Referring to Ariely’s work, she said people’s most crucial financial choices generally boil down to three questions: what they should spend, when they should spend it, and how they should invest for the future.

“The majority of advisors start with the third question, and they don’t ask the first two,” Milum said. “Investment returns are important, but so much of the value of an advisor comes from helping people stay committed to the long term through their day-to-day spending and investing decisions.”

Of course, long-term thinking tends to go out the window when people are in a “hot” or excited state of mind. That’s the state investors have been in during the course of the pandemic, but as Milum noted, their attitudes and behaviours have shifted: while the vast majority rushed out of the markets and into cash amid COVID fears and the first-quarter downturn of 2020, recent movements in the financial markets have been more euphoric.

Aside from the incredible rise of GameStop share prices, an eye-watering surge in Bitcoin over recent months – right now it’s hovering around $60,000 – has captured people’s imagination. Flush with cash and having ready access to online investing platforms, individual investors are eagerly looking for ways to get a piece of the action, with many getting burned as they buy high, sell low, and get too heavily concentrated in risky assets.

“I think it is a great time to invest, but invest based on your long-term goals,” Milum said. “A lot of people may be expecting double-digit returns all the time, so advisors have to remind them that’s not sustainable.”

The course also comes at a crucial point for the Canadian financial services industry. With client-focused reforms (CFRs) set to kick in later this year, advisors are expected to be more mindful about conflicts of interest, product suitability, and knowing their clients’ risk tolerances. That makes the task of collecting client information so much more important.

“We didn’t create the course with the CFRs in mind, but I think it’s such a huge complement to the tools advisors need to prepare,” Milum said. “Have you updated your clients’ goals? Have you asked them what’s changed about their financial situation in the past year? Are you really capturing that context within which people are making decisions? I think the insights we share will help advisors ask the type of thoughtful questions that will be even more essential because of the reforms.”

Beyond unlocking vital information, financial professionals will also have to become good behavioural coaches. For many Canadians, life with COVID-19 may feel like walking on a knife’s edge, which puts more clients at risk of making emotive financial decisions. Rather than save money, they may try to get retail therapy online, have unnecessary home renovations, or invest in meme stocks just for the thrill of it. 

“With so many people wanting near-term gratification, it’s very hard to focus on retirement 20, 30, or however many years down the road, and how much money that would take to sustain,” Milum said. “There’s a huge amount of willpower involved, and advisors have to be equipped with the tools and insights to help clients stay on track.”


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