3 Ways to Give Better Advice by Understanding Behavior

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For example, many Americans hold most or all of their assets as cash in traditional checking and savings accounts. While this might seem like a safe choice, it is a costly long-term decision, as these funds are not being optimally invested for growth.

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By using behavioral segmentation, firms can offer tailored advice that helps clients allocate their resources more effectively.

2. Design With Cognition in Mind

By integrating behavioral insight into financial product design, financial institutions can begin to have clients’ behavioral tendencies work for them, rather than against them. For example, many people struggle with the complexity of financial products, often leading to poor decision-making.

To address this, wealth management firms need to embed an understanding of consumer behavior into the design of their interactions or “choice architecture.” A shift to designing based on an understanding of people’s limited cognitive bandwidth is one example where significant gains can be made to drive engagement and better outcomes for customers.

A practice that started with developing ‘nudges’ to improve things like retirement savings behavior has now been incorporated into digital services. Platforms like WealthSimple have gained popularity by presenting financial decisions in clear, easily digestible formats. By reducing jargon, clarifying pricing structures, and streamlining the user experience, financial institutions can help a broader audience engage with financial planning and make better-informed decisions.

3. Use AI the Right Way

Generative artificial intelligence (AI) offers significant potential for wealth management, but applications must be designed with clear business outcomes and customer behavior in mind. For example, many investors seek human advisors to alleviate the psychological burden of managing their finances, and there is still a trust gap when it comes to AI-generated advice. In fact, 51% of U.S. investors say they do not trust AI-driven financial advice without human oversight. Younger generations, especially Gen Z and millennials, are more comfortable with AI, but are still more likely to follow advice when it comes from a human finance professional.

Real value can be driven through the application of generative AI to support advisors, enabling them to provide more holistic, efficient advice through improved information synthesis and retrieval processes to better support clients. This approach not only improves client satisfaction, but also enhances the advisor’s role, making it more focused and productive, while reducing cost-to-serve. The improved efficiency enables the delivery of high-quality services to a broader range of consumers.

The Future of Financial Advice

As people live longer and plan less predictably, the demand for intuitive, personalized financial services will only grow. By integrating behavioral insights into their offerings, wealth management firms can meet the shifting needs of their clients and gain a competitive edge in a rapidly evolving market, to grow and maintain their customer base and increase the scale of their assets under management.

Colm Mulcahy is a research specialist and behavioral economist at Accenture’s global R&D innovation center, The Dock. Scott Reddel is capital markets industry lead at Accenture.

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