Lift client financial self-efficacy

and with it your behavioral competencies....

People are complex, money is emotional; both co-exist in a world changing around them randomly and discordantly. It’s your job to steer people and their money on a rewarding course through a wildly unpredictable, never-ending and unforgiving storm; our economy. At your disposal; prudent investment optimisation by the firm and what should be a program to improve the financial capability of clients so they can stay the course set for them.

Financial capability refers to the ability to apply appropriate financial knowledge and perform desirable financial behaviours to achieve financial wellbeing (Xiao, Chen and Chen, 2013).

According to Xiao (2013), perceived financial capability can be considered the equivalent of financial self-efficacy . We use self-efficacy tracking in behavioral finance as a measure of progress by an individual through stages of change as they work toward self-determined financial behavior. It’s a simple, reliable metric for assessing client confidence, contentment and ability with financial management. Xiao, also discovered that desirable (positive) financial behavior and subjective financial knowledge have stronger effects on financial satisfaction than perceived financial capability.

In effect, this means that clients “doing the right” things with you helping them improve their financial knowledge helps enhance an individual’s perceived financial capability increasing their satisfaction.

So, how do you, as an adviser aid and abet this?

Rather than relying on periodic news columns and glossy brochures as your font of financial wisdom, be more productive and discerning in providing relevant, practical,brief information bytes through mobile and social media channels.

You want trust? Deliver quality, impartial financial literacy for free

You want trust? Deliver quality, impartial financial literacy for free

The Power of Observational Learning

Bandura (1982) believed an individual’s sense of self-efficacy can play a major role in how they approach goals, tasks, and challenges. Improving self-efficacy relies to some extent on leveraging observational learning and social experience. Bandura believed that an individual's actions and reactions, including social behaviors and thought processes, are primarily influenced by the actions that individual has observed inothers. He found that people with high self-efficacy generally believe that they are in control of their own lives, that their own actions and decisions shape their lives, while people with low self-efficacy may see their lives as outside their control. You would observe this contrasting outlook across your own client base.

The take-away from this is any content or systems-based services ( web-app) from the firm intending to deliver improved self-efficacy should be shaped around a decent level of behavioral insights and knowledge of individuals or bands of similar clients so that the content and or service is relevant and effective. Greater use could be made of case studies via deeper-broader media excerpts (videos; Facebook LIVE) of clients others can relate to who have improved their financial self-efficacy and satisfaction through engaging with the firm’s advisory team.



How am I doing?

Improving self-efficacy

Your role as an adviser is to not only help guide clients into effective financial decision-making but also encourage and support improved financial autonomy.

When we see someone else succeeding, our own self-efficacy increases; where we see people failing, our self-efficacy decreases. This process is most relevant when we see ourselves as similar to the model. Although not as influential as direct experience, modeling is particularly useful for people who are unsure of themselves. Making use of social learning patterns such as normalised comparisons for behaviors including the comparison of the financial knowledge may be worth considering for client-facing support systems.

In plain English; seeing how somebody similar to them is progressing is a positive influence on lifting self-efficacy;maybe your web sites and app should tap into that.


How do I compare?

Tell me how I improve

Social persuasion

This is usually expressed as direct encouragement or discouragement from another person. Discouragement is generally more effective at decreasing a person's self-efficacy than encouragement is at increasing it.

As obvious as this method is, does your firm embrace and implement a program of client-wide, positive social persuasion?

A pragmatic starting point may be making better use of client-facing systems. These should be proactive, readily accessible and not rely one mail and the web i.e. explore mobile options. Ideally, such a system would enable adviser client feedback 1:1 and 1:many as a means to providing positive feedback and content to a large number of people but tailored to suit differences; think EMOJIS and their real-world equivalents.

Social comparison

Researchers have found that where a person believes they stand relative toothers has a much larger effect on happiness than absolute income. Social comparison theory argues that humans have an innate need to assess our social and personal worth, and when there is no objective means to do so, we look to people similar to us to inform an assessment.

The healthiest option could be to redirect our need to make social comparisons toward those that don’t elicit negative emotions, giving us a path that might lead to improved emotional health. The focus of these comparisons should not be those ranked higher in terms of income and nett worth. It is best to encourage your clients to make relative comparisons to similar others based on demographic and income equivalence.

Applying social comparison

In a study by Newcomb (2018), it was found that certain mental factors—such as the direction and frequency of social comparisons—had strong associations with financial well-being. analysis showed that social comparison explained more of the variation in financial well-being than a person’s income level, age, gender, or education. No matter the income group, people were still looking up to higher earners, and also feeling bad about their situation. Newcomb advises that clients should anchor their comparisons toward those that make you feel empowered rather than demoralized. This can improve their financial health and well-being.

Newcomb’s bottom line is if you can’t identify with the people you’re comparing yourself with, the effect may not be strong enough to help your financial well-being. We don’t get as much value from comparing ourselves with people we have nothing in common with.

How can you make the most of these social comparison dynamics with your client base?

Try providing systems based access to comparative performance enabling clients to compare their performance for example on financial literacy measures or improved cash-flow or net worth; do this based on selectable demographic criteria.


Bandura, A. (1986). The Explanatory and Predictive Scope of Self-Efficacy Theory. Journal of Social and Clinical Psychology, 4(3), pp.359-373.

de Meza, D., Irlenbusch, B. and Reyniers, D. (2008). Financial Capability: A Behavioural Economics Perspective. Consumer Research #69. [online] London: UK Financial Services Authority, pp.2-102. Available at:[Accessed 28 Feb. 2018].

MORNINGSTAR (2018). The Comparison Trap How Social Comparisons Affect Our Financial Well-Being. [online] pp.1-9. Available at: [Accessed 1 Mar. 2018].

Oprean, C. (2014). Effects of Behavioural Factors on Human Financial Decisions. Procedia Economics and Finance, 16, pp.458-463.

Tang, N. and Baker, A. (2016). Self-esteem, financial knowledge and financial behavior. Journal of Economic Psychology, 54, pp.164-176.

Xiao, J. and O'Neill, B. (2016). Consumer financial education and financial capability. International Journal of Consumer Studies, 40(6), pp.712-721.

TRUST me, I'm an Adviser......

Trust is a multi-dimensional notion integrating cognitive, emotional, and behavioral dimensions (Lewis & Weigert,1985). Use the  definition you prefer, but by any measure, clients of Australian financial advisers have justifiable trust issues.

Madamba & Utkus (2017), found within their own clientele  that trust in a financial advisory relationship can be divided into three components—functional,emotional, and ethical. Emotional trust has the greatest impact on overall trust, followed by ethical and functional trust.

Advocating for a client and acting in the client’s best interest are the top two drivers of an advisor's trustworthiness. While emotional trust has the largest influence in building trust, a failure in any of the components can compromise trust. Investment underperformance, neglect of the relationship, and unsound investment decisions are key contributors to the erosion of trust.

Functional factors

These refer to an advisors’ qualifications and skills, and the day-to-day operations of their practice including the development and administration of a financial plan. Functional trust accounted for 17% of overall trust.

Emotional factors

These are intangible aspects of the relationship that exists between the investor and financial advisor capable of eliciting affirmative emotions in the investor.

Emotional trust was the largest component, accounting for 53% of total trust.

Ethical factors

Cover practices or behavior that are consistent with socially mandated expectations of correct conduct. Such practices span the absence of a conflict of interest, complete transactional and informational transparency, charging reasonable fees, and acting in the best interest of the client. Ethical trust represented 30% of overall trust.

Cull on Trust - Australian Financial Planner Research

Cull and Sloan (2016) specifically examined trust in Australian financial planners and expanded on the attributes they believe are fundamental to client trust in their advisers as shown in the diagram.




Empathy+Integrity +Intelligence+ Transparency

The research empirically demonstrates that competence - both behavioural and technical - is a characteristic of trust in personal financial planning. What is frightening is that according to ASIC little more than 30%+ of Australian financial advisers have so much as a basic undergraduate degree; what an absolute farce. And they want to charge you how much to do what? That’s too much for doing in many cases nothing.

The work of Cull & Sloan suggested that increased legislation and improvement in the behavioural and technical competency of advisers can build consumer trust in financial advice. If only somebody had told the companies that have since conspired to drag financial advice into the mud through what amounts to larcenous acts against clients.

Grand larceny on scale in Australia

And so it is again, not for the first time in recent memory, a financial advisory industry has been found sorely wanting; in integrity, competency and sensibility.

The current Royal Commission into The Australian banking and financial services industry found that major operators, The Commonwealth Bank, ANZ, Westpac, National Australia Bank and AMP had financial advisers that failed to comply with the best interests of customers in 75% of advice files reviewed. 

It’s gratifying to see the market punish operators that sail close to the wind; AMP, for example, is now facing four class actions because of its fee-for-no-service scandal and the subsequent misleading of the corporate regulator. The wealth manager’s chief executive, Craig Meller, and chair, Catherine Brenner, have both been forced from their roles.  Around 30% has been wiped from the company’s share price in the past three months.

There should be no pity shown these firms. Their leadership needs to double-down on regulatory compliance and make efforts to evolve their core competencies, transactional transparency and fee-justification without compromise in order to rebuild a modicum of trust. They could do worse than hire 'C' level leadership from outside the industry.

The ultimate perversity of course is that in all of the available literature, “trust” is highlighted as the most important determinant in seeking a financial service professional for advice (Hung et al., 2010).

Of course, given the depressingly large number of cases of incompetence and fraud inflicted on paying customers ( in a true profession we have clients; in financial advice there are customers until the level of professionalism evolves) it would not be unreasonable to suggest that only a handful of financial advisers would read any industry-focused academic research, let alone understand it. They should be knocking down the door of people like Dr Michelle Cull of UWS and asking questions and accepting advice on how to improve. There are many passionate, qualified financial advisers who consistently do the right things, it's to them we must look for for leadership. They will need encouragement and support to implement the mooted ASIC changes from external technical experts. 

Australian Millennials Vote with Disinterest

Unsuprisingly, younger generations make very little use of professional advisors

Only 7.4% of Millennials who have any type of wealth management product obtained it from a financial professional but were much more reliant on their employer (89.1%). Generation Z shows a similar picture, with only 4.1% purchasing from a professional, compared to 91.7% from their employer. (Roy Morgan Research - Australia, 2017).




are not buying what you are selling


The challenge for professional advisors and wealth management customers is how to provide advice to low value customers and how to get them more involved in a topic of little interest to them.

“With the employer generally being the major channel for obtaining wealth management products, due to the dominance of superannuation, it is unlikely that they will have the resources to provide comprehensive financial planning advice, this is the role of the financial professional. (Roy Morgan, 2015)

How do we build trust with Millennials?

Providing persuasive design principles are not hijacked and twisted into deceit and manipulation, they can be used to guide interactions in general and technology interventions in particular that build trust, confidence and competence.

Even in this current dire circumstance, there is real opportunity for investment firms who can master the hybrid advice mix. Despite their love of all things digital, tech-savvy millennials will still require the human touch and nuanced advice a human advisor can give— particularly in more complex investing situations. Combining that with the speed, low cost and mobility of robo-advice would allow  firms to best serve Millennials moving forward.

This diagram (Accenture, 2017) summarises the needs of Millennials when it comes to tech-based service delivery. Australian (and NZ) financial advisers may want to engage in a complete overhaul of core competencies, fee transparency and the grafting on of a moral compass to their banal vision statements before seeking behavioral science and product development expertise from a professional services market who increasingly regard financial advisers with suspicion yet hold the key to opening the door to millennial wealth advice.


The next article will illustrate and explain how persuasion can be used ethically to lift trust and responsiveness in the financial advice market.


Burke, J. and Hung, A. (2016). Trust and Financial Advice. SSRN Electronic Journal.

Cull,M. and Sloan, T. (2016). Characteristics of Trust in Personal Financial Planning. Financial Planning Research Journal, 2(1), pp.12-35.

Debbich, M. (2015). Why Financial Advice Cannot Substitute for Financial Literacy?. SSRN Electronic Journal.

Kim, K., Anderson, S. and Seay, M. (2017). Financial Literacy and Financial Decisions of Millennials in the United States. SSRN Electronic Journal.

Madamba, A. and Utkus, S. (2017). Trust and Financial Advice. Vanguard Research. [online] Vanguard. Available at: [Accessed 28 Jun. 2018].

Love thyself, love thy money

There are a few useful definitions of self-compassion, personally I view it as a trait whereby you are mindful of your own constraints, limitations and challenges so that you are comfortable with being kind to yourself. It's about accepting and forgiving shortcomings; living assuredly with your own humanity. Importantly, from this state should stem empathy with, affinity for and willingness to help others; (Welp and Brown, 2013).

Leading researcher into self-compassion and its role in mental health, Dr Kristin Neff makes it clear what self compassion is not. It is not self-pity which is a state  built on disconnectedness and negative self-absorption. Nor is it self-indulgence which is a kind of avoidance behavior whereby the individual will treat themselves to a period of indolence and excessive pleasure. These are avoidance actions that can run contrary to healthy lifestyle choices and impede the individual's ability to acknowledge their shortcomings and address them affirmatively.


Self-compassion should never ever be confused with self-esteem. This is focused on self-worth which in western culture to a large extent depends on validation by others of our individual "specialness; how we look, what we do, how we perform, where we live and how much we earn. Postures turn defensive if individuals have their self-esteem threatened by the doubt and opinions of others. With self-compassion weaknesses are acknowledged, accepted and not railed against. They are not hidden. An individual with developed self compassion has no dependence on external validators. According to Neff,

" research indicates that in comparison to self-esteem, self-compassion is associated with greater emotional resilience, more accurate self-concepts, more caring relationship behavior as well as less narcissism and reactive anger."

Certainly, there is some evidence to suggest that low self-esteem is associated with deleterious consumer purchasing behaviors; (Hanley and Wilhelm, 1992).

It would be difficult to argue against the development of self-compassion as a positive trait for mental and physical health. Dunne, Sheffield and Chilcot, (2016) found a significant direct effect of self-compassion on physical health through health-promoting behaviours. Certainly, the evidence for efficacy and potential application of compassion as an intervention strategy is well documented by (Kirby, 2016).

So, what's this got to do with design considerations for a project like a mobile app for millennials and their financial advisers? We take it as an opportunity to:

  1. Investigate the role of self-affirmative UI elements in improving app usage persistence
  2. Instrument relevant scales via chatbot to determine any associations between self affirmative behavior and our evidence-based financial behaviors framework.
  3. Investigate the association, if any between self affirmation and self compassion levels in our particular problem domains of personal finance and health and wellbeing.

Depending upon the outcomes we may subsequently design and validate our own behavioral scale; watch this space as depending upon the uptake of our #fintech app for millennials and advisers we may have enough observational data to share by year's end.


Barnard, L. and Curry, J. (2011). Self-compassion: Conceptualizations, correlates, & interventions. Review of General Psychology, 15(4), pp.289-303.

Dunne, S., Sheffield, D. and Chilcot, J. (2016). Brief report: Self-compassion, physical health and the mediating role of health-promoting behaviours. Journal of Health Psychology, 23(7), pp.993-999.

Galante, J., Galante, I., Bekkers, M. and Gallacher, J. (2014). Effect of kindness-based meditation on health and well-being: A systematic review and meta-analysis. Journal of Consulting and Clinical Psychology, 82(6), pp.1101-1114.

Hanley, A. and Wilhelm, M. (1992). Compulsive buying: An exploration into self-esteem and money attitudes. Journal of Economic Psychology, 13(1), pp.5-18.

Kirby, J. (2016). Compassion interventions: The programmes, the evidence, and implications for research and practice. Psychology and Psychotherapy: Theory, Research and Practice, 90(3), pp.432-455.

Roberts, J., Manolis, C. and Pullig, C. (2014). Contingent Self-Esteem, Self-Presentational Concerns, and Compulsive Buying. Psychology & Marketing, 31(2), pp.147-160.

Sirois, F., Kitner, R. and Hirsch, J. (2015). Self-compassion, affect, and health-promoting behaviors. Health Psychology, 34(6), pp.661-669.

Welp, L. and Brown, C. (2013). Self-compassion, empathy, and helping intentions. The Journal of Positive Psychology, 9(1), pp.54-65.