Want to Know How Advisors Are Sabotaging Themselves?

As the financial services industry has evolved away from transactions and toward financial planning, an interesting shift has happened: more couples have started showing up in advisors’ offices to discuss their investments and their financial plan. Now that there are two people in the room, advisors struggle when deciding which one to talk to.

We are long past the day when men controlled a couple’s financial affairs. Today, many women are the primary earners, with men taking a back seat in financial decision-making. We also see more unmarried partners who choose to keep their finances separate. These trends have had a major impact on client relationship management. Advisors now need a strategy for communicating with two distinct decision-makers. Those who don’t have such a strategy sabotage their ability to get and keep good clients.

Behavioral Economics Reveals an Even More Substantial Challenge

To complicate matters further, not only are there two people who are making the financial decisions, there are also two distinct decision-making systems in play.

In his book, Thinking, Fast and Slow, Daniel Kahneman synthesized four decades of research into a simple observation: the human brain uses two distinct decision-making systems, System One and System Two, to navigate the world. System Two represents the rational mind that uses logic and language to process information, make predictions and solve problems. This system equips human beings to think through issues and make rational, non-emotional decisions. It’s the driver behind the scientific method—and civilization itself.

System Two uses a lot of energy to deal with information and is easily fatigued. When faced with danger, complications or fatigue, System Two shuts down and turns things over to a different process. Kahneman calls this process System One because it is far more influential in human decision-making. In many situations, a person automatically shifts from System Two to System One quickly, and without noticing.