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.

Dr Daryl Foy

Dr Daryl Foy is a Behavioural Scientist who specialises in the design of effective health behaviour change apps based on evidence including his own validated models for optimising persistent use. He consults to industry on how-to integrate persuasive design into LEAN product development as well as conversational UI. He can be contacted at