Fans of the techniques say it enhances understanding of customers’ needs and helps advisers have more effective conversations with them.
But is it possible clients could be manipulated by sales techniques backed by behavioural science?
According to Wikipedia, behavioural science can be defined as ‘the systematic analysis and investigation of human and animal behaviour through controlled and naturalistic observation, and disciplined scientific experimentation’.
Aviva is one protection provider promoting the use of behavioural science. The insurer is quick to point out that the UK population is vastly underinsured, with only four in 10 families having life cover (according to the Family Finances report, December 2013).
October 2014 saw Aviva publish its third New Thinking guide, aimed at helping advisers connect with their ‘sandwich generation’ (typically aged 45-60) clients. It found only 8% of advisers said their sandwich generation clients had enough financial protection.
“Clearly something isn’t quite working, which is why over the last two years we have commissioned a range of behavioural science-based adviser-focussed tools which provide innovative and practical support for advisers when they’re having sensitive conversations with customers,” says Jim Hunter, senior protection sales manager at Aviva.
Hunter said that by helping advisers understand the complex decision-making processes of their clients they could interact with customers more effectively. The techniques can help to unlock clients’ underlying motivations, inspire them to reconsider financial priorities, introduce and approach difficult topics and produce better outcomes for customers.
The New Thinking guide, written by behavioural scientist Professor Paul Dolan and business author Steve Martin, presents behavioural science techniques which are aimed at helping advisers better understand their clients and have more effective conversations with them.
In a video clip for advisers on the Aviva website Martin discusses his behavioural top tips for protection advisers.
The first is ‘saliency’ which includes how to present and position a customer’s options. He suggests that putting the most expensive option first will make the next option appear more cost effective and more likely to be seen as an attractive one. He adds that it’s best not to give too many choices as this makes the process more complicated (less salient) and could hinder the decision process.
Other tips are around ‘reciprocity’ which is the idea that people tend to give back to others the form of behaviour first received. Martin offers the example of giving your client a book about protection and personalising it by writing their name on it – he says this will increase the chances of the client engaging with you.
The FCA also backs behavioural science or behavioural economics to support increased competition in financial services. Speaking at the Australian Securities and Investments Commission (ASIC) last year, FCA chief executive Martin Wheatley said behavioural economics is a game changer for firms and consumers, and also future regulation.
“From the FCA perspective, we’re already seeing significant possibilities across a range of UK markets like cash savings, general insurance and retirement income, with more to follow shortly,” he said, “But I think there’s also opportunity here for behavioural economics to support more specific issues like complexity; consumer inertia; marketing and the impact of firm communications to consumers.”
The FCA published a paper about behavioural economics in 2013 in a bid to open up the debate. Although largely supportive of the use of behaviour science in financial services sales, the paper’s conclusions did identify some consumer errors that could be exploited by firms.
For example, some customers will be willing to pay high prices for products that give them peace of mind. Also consumers’ valuations of the product and what they need can be shifted at the point of sale by offering alternative products that change their reference point, for example, a product can appear cheaper when sold with more expensive products.
The FCA says this can be remedied by providing alternative anchor or reference points that can lead consumers to better choices and restricting the use of irrelevant product alternatives (e.g. insurance ‘optional extras’).
