This post is part 10 of our 10 part series on Financial Behavioral Insights from our Financial Planning Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.
Behavioral Insight 10: Anchored Implementer
Mary Winter is 55 years old and hopes to retire in 5 years. For some years now, Mary has been working with a financial advisor to manage her finances. The advisor has focused Mary on a specific rate of return for her portfolio and some benchmarks to watch. Mary says she is quite comfortable because the process is concrete and she knows her advisor is following a simple and disciplined process. At times when the advisor does suggest a new idea that could be tested out, Mary says it makes her uncomfortable.
Naturally consistent and experience-driven people will be Anchored Implementers who are able to focus on a plan but may overvalue proven strategies.
Communication key: keep it tangible and provide the logical steps.
Mary is a traditional Anchored Implementer for who investing in the familiar is very important to her emotional comfort. Anchored Implementers will adopt a logical and sequential left brained approach in choosing tried and tested products and solutions. They are interested in being provided with straightforward strategies and a concrete investment plan with clear implementation steps. Further, they need clear benchmarks to measure performance. Generally, they do not want to be exposed to new ideas that they cannot get their head around. For Anchored Implementers, taking on new ideas is quite risky. They do not need to be on the cutting edge of everything and are overwhelmed by advisors who give them non-traditional investments to try out.
A struggle will be that Anchored Implementers become too focused on a strategy and fixed on specific investment benchmarks to monitor performance. The consequence being they do not look out to re-adjust when needed. They can lock themselves into a strategy and a plan without the drive or creativity to get out of the box.
For advisors who are Anchored Implementers their strength will be following a consistent process in how they advise their clients and execute the plan. The clients will know where they stand and have clarity. However, the Anchored Implementer as an advisor may struggle to be flexible when a different path needs to be followed or they have a client who wants to explore more creative ideas.
The key for advisors in advising Anchored Implementers is to keep them focused on their overall long-term investment goals and maintain a consistent process. However, they should not be provided with artificial or narrowly focused benchmarks that are followed in a way which distracts them from the bigger picture of achieving their goals. Ask the client: Tell me about how you would like your financial plan presented and monitored? Tell me about how would you prefer new products and solutions to be introduced to you?
What are your thoughts? For additional information on discovery through behavioral profiles, click here.