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Nudges That Drive Client Behavior

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A tactical strategy to gain trust and guide clients more effectively

Why do people make the decisions they do? One explanation: Bias. FlexShares’ research into the behaviors of high-net-worth clients revealed how internal biases form specific client personas which, in turn, shape their approach to making financial decisions.

The Flexible Advisor discussed this topic — and how planners and advisors can adjust their approach accordingly — with Patrick Fagan, a behavioral scientist with more than a decade of experience applying psychology to influencing behavior in the real world.

“We are cognitive misers,” said Fagan. “There is an infinite amount of information and choice in the universe; we simply don't have the time, cognitive energy, or motivation to process it. Instead, we rely on subconscious shortcuts. For example, given the choice between two restaurants, one extremely busy and the other almost empty, most of us will opt for the busy one. We almost instantly perceive that if it's busy, it must be good. That’s a shortcut we call social proof.”

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Fagan suggests that when financial professionals understand the various shortcuts people lean into, using them as a tool rather than an obstacle, they can increase their success in building more productive client relationships. He refers to what he calls the “nudge” — using a person’s biases to influence their decisions. Certain nudges are fairly obvious, and work more or less with everyone.

  • Warmth is about being likable, being seen as ethical and kind and caring. Tactics to build that warmth include smiling, using the client’s name when talking to them, mirroring their body language, and repeating what they say in your own words.
  • Competence is about showing high-performing expertise, credibility. In addition to ratings and certificates and awards, it's using technical language. One study suggests speaking with a deeper voice, which can be seen as authoritative.
  • Prestige is about what other people say about you — your reviews, your endorsements, even a degree from an impressive university. 

Specific nudges can be used to build trust with clients, according to Fagan.

  • Social modeling. We tend to do what other people do. When we see that someone is doing a certain behavior, we are more likely to follow. If you can show a client that somebody is doing something with a degree of success, they are more likely to trust it and do it as well.
  • The “foot in the door” technique.  People generally want to avoid big asks. If you ask a client to take a big step all at once, they sense risk and may not trust it. If you pull them in gently, step by step, you're more likely to get them there in the end.
  • The “free to choose” technique. If you try to push, some clients may be inclined to do the opposite of what you're suggesting. Be clear that it's their choice. Fagan says that ending a request with some version of “It's your choice,” increases the likelihood of a client’s buy-in.


According to Fagan, “You have to understand your market and its different segments to craft nudges that work. For example, our research found that people who are open to new experience and more creative are more likely to trust people who demonstrate a strong ethical code. People who are conscientious and organized are more likely to trust someone they perceive as being competent and reliable.

   “Losing a hundred dollars is twice as painful as the pleasure we experience from winning a hundred dollars.” - Patrick Fagan

In any case, personal biases play a key role. “People may resist new facts because of a bias called loss aversion. People are about twice as sensitive to loss as they are to gain. In other words, losing a hundred dollars is twice as painful as the pleasure we experience from winning a hundred dollars. With respect to new information, people may feel an ownership and an investment in their beliefs. It can be painful to lose that intellectual investment. Some clients may exhibit what's called ‘the ostrich effect,’ sticking their heads in the sand and just not listening.”  In these situations, Fagan suggests the “foot in the door” technique. “Don't try to convince them of something all at once. There's a saying that you need to take people through the lobby before you show them the penthouse. Try to find some middle ground and gently pull them along rather than overwhelming them.  Plant seeds and wait for them to germinate. Don't be afraid to wait.”


  • Understand different segments to craft nudges that work.

  • Plant seeds and wait for them to germinate. Don't be afraid to wait.

  • Approach each suggestion by discussing the emotional and functional outcome.


We asked Fagan to apply this concept to The Competitor — a client who tends to assume they know more than their advisor. These clients often conduct their own security research and focus on beating market benchmarks. In this case, said Fagan, One tactic would be the ego nudge. Boost their sense of status, make them feel special. Also, tap into their motivations. This persona wants to be successful and influential. Incorporate that motivation into what you're proposing as the targeted outcome. Also, because these individuals may be quite cynical it's important to be honest. Discuss both sides of the argument objectively. Start with the side opposite to yours, then give your side. That can help to make your reasoning seem more credible and trustworthy to the client.”

As more advisors seek to expand their practices into a holistic planning model, we asked about how one can address The Collector — a client that might lean into planning but poses a challenge because they've diversified assets among many advisors.  Here, says Fagan, a key principle is to focus on the client’s primary question: “What's in it for me?”  As Fagan puts it: “See things from your client’s point of view. What's the benefit of taking a more holistic approach, not just from a functional standpoint but from a motivational point of view. Is it going to provide a feeling of success? Bring security, order, and safety to their life?”

This points to a general rule of thumb when working with any investor persona: You want to approach each suggestion by discussing the emotional and functional outcome. Framing client discussions in terms of the persona’s underlying biases and motivations can make a notable difference in an advisor’s success.

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You can access the full discussion on The Flexible Advisor, wherever you get your podcasts.

Definition:  The term Alpha is used in finance as a measure of performance, indicating when a strategy or portfolio manager has managed to beat the market return or other benchmark over some period. 

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