Journal of Financial Planning: January 2023
Kalli Fedusenko is a digital marketing director, speaker, coach, and author. Founder and director of Kalli Collective, Kalli combines her expertise in financial planning and digital marketing to help financial industry professionals give their brands a powerful voice. She enjoys gardening and adventuring with her husband, Mic, and pup, Clementine.
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Behavioral finance studies the psychology influencing people’s financial behaviors. Believe it or not, behavioral finance has been around since the 1970s, though it seems to be getting all the buzz in recent years. It’s a vital piece in guiding your clients’ decision-making. You can’t coach someone you don’t understand, and you can’t understand your clients without behavioral finance.
You may be wondering what other areas of your business have a behavioral segment. Can marketing be behavioral? The answer is yes, but its meaning is completely different from behavioral finance. Behavioral finance studies the psychology behind your behavior. Behavioral marketing, on the other hand, studies your behaviors, not the psychology behind them. Let’s back up. Before we can explain behavioral marketing in detail, we need to have a firm grasp of marketing.
Marketing is the promotion and sales of products and services. Though behavioral marketing is not about psychology, basic marketing, if it’s good, does consider the psychology that influences your purchasing decisions. You can’t have a business without marketing, and you can’t have good marketing without psychology.
Now back to behavioral marketing. Behavioral marketing releases targeted promotions and communications to people based on their interactions with content, otherwise known as behaviors. You know how you went to a webpage from a financial educator to read about loss aversion finance bias, and now you’re seeing ads on websites and receiving emails from that educator on their behavioral finance class? That’s behavioral marketing. The behavior of going to that webpage revealed your interest in that subject. Your interest made you a warm prospect. Each click increases the likelihood of your interest in the product or service for sale.
Many people aren’t familiar with the term “behavioral marketing,” but they are familiar with the concept and don’t like it. Behavioral marketing has generated a bad reputation in the last few years from bad players. These organizations own platforms that you use daily. They monitor and store all of your actions, then sell this data to the highest bidder regardless of how it will be used.
Behavioral finance and behavioral marketing both have the ability to manipulate people to make poor decisions, but they both have the ability to help them, too. Consider that behavioral finance is partly responsible for the American credit crisis. For decades, credit card companies have used behavioral finance via credit card rewards to manipulate the American public to continue increasing their credit card debt. Yet, we still see the value in behavioral finance and how it can help people. With great power comes great responsibility.
Now that we’ve hashed out each concept, let’s discuss how you can combine both methods to build your business and enhance your clients’ experiences with your firm.
Add Finance Bias Tags to Your Contact List
Most CRMs allow you to add tags to contacts. You may already be familiar with the following tags: pre-retirement, in-retirement, Roth-eligible, small business owner, Medicare, etc. Tags allow you to pull a list of your contacts with the applied tags so that you can send targeted, applicable communications. For example, you wouldn’t send a reminder to fund a Roth to someone ineligible to have one, so you would pull a list of contacts with the “Roth-eligible” tag.
In addition to adding tags related to your clients’ demographics and hobbies, add tags on their biases! This will help you personalize your communications and inform everyone on your team how to interact with your client. Maybe you don’t know each client’s biases yet, but that’s OK. You can add them as you learn more about your client during every meeting. Tags are fluid. You can add and remove them whenever you want.
Send Emails to Contacts Based on Their Bias
One of the most significant differences between you and a robo-adviser is personalized service, so apply your level of personalization to your communications, too! The market took a plunge. It happens. What if you had two similar emails prepared? One email was written for those with loss aversion bias, and one was written for those with confirmation bias. In the loss-aversion email, you focus on the fact that the best time to invest is when the market is low. In the confirmation bias email, you focus on the importance of not letting the emotional headlines of the media drive your financial decisions. You would send each email version out according to the tags you added. How powerful would that be? You would be meeting your clients where they are. That’s a whole new level of service.
Draw Attention to Biases in Social Media Content—Subtly
We all have some bias we’re unaware of, but nobody likes their flaws to be pointed out. Like the example above, you didn’t send an email when the market dropped, saying, “You have confirmation bias. Don’t watch the news.” No, you pointed out how the media makes money from viewers, and making something seem big and scary draws in viewers despite what reality may be. Do the same thing in your social media content! Address the symptoms of the bias without diagnosing to avoid putting your audience on the defensive.
You can’t select people with tags to see your content on social media, but you can release content on the same subject for different audiences. Like the email example above, you can create two separate pieces of content for social media on the same topic from a different viewpoint. Remember to keep it short on social media. Attention spans are much shorter.
Use Targeted Content to Add a Tag and Send Emails
This one is not for the faint of heart. It takes at least three moving pieces: social media, CRM with tracking and automation abilities, and a drip campaign. If most of these words are foreign to you, please hire a professional to help.
Here’s how it works: You have a CRM with code added to your website to track your contacts’ actions (behaviors). You post content about market volatility on your social media accounts from the POV of three different biases. You can’t track who clicks on which post and link it to your CRM from the social media post itself, but you can make each post link to a different URL on your website. The link could direct your audience to the same blog article using different URLs, or you could link to three separate webpages for each post. Because you have the tracking code on your website, you can track in your CRM which URL someone visits. Every time one of your contacts goes to that URL, you have an automation created in your CRM to add a finance-bias tag based on which social media post they clicked on.
Now when you send emails customized to a finance bias, your contacts will receive that version. You can also create a series of emails to automatically send on the same subject as your post, all written from the finance bias POV of the original social media post.
As you can see, a lot of preparation is involved in pulling this off seamlessly. You need to have different posts created, different URLs, automations, and drip campaigns all ready to go before releasing this content.
Reiterate You’re Here to Help Make Better Financial Decisions
Always come back to the point that you’re here to help clients make more rational financial decisions. When the market dips and you caution against watching the news headlines, come back to why you’re cautioning against this. It’s not because you have a control complex or because you won’t make money if clients put their investments into cash. It’s because you’re trying to help them make better, more rational decisions. That is your purpose, and you have the ability to guide them on a personal level that a robo-adviser can’t.
Monitor Content Performance
You’ve done it! Congratulations. You’ve intertwined behavioral finance and behavioral marketing, but your work isn’t over. That was just the legwork. Now you need to monitor how your content performs. What topics get the most engagement? Does your audience lean into one finance bias more than the others?
Monitoring your marketing campaigns’ performance is just as important as setting your marketing plans and making them tick. At the very least, you should pull your metrics annually. Facebook and LinkedIn offer insight and metrics tabs to look at these numbers from their platforms. Your website needs to include tracking code from providers like Google Analytics. Pull the numbers for each piece of content to see which elements perform the best on all platforms.
The most successful advisers are obsessed with their clients’ experience, and merging behavioral finance and behavioral marketing has the potential to elevate your clients’ experience in new and exciting ways. The ideas we’ve offered in this article are just the tip of the iceberg of what is available to you. With the right developer and imagination, anything is possible to achieve on the World Wide Web. If you’re like me, you can’t wait to explore the endless opportunities out there!