Why Neuroscience Trumps Investing Expertise In Gathering AUM
July 7, 2015
By Dan Solin
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Last week I discussed the role that oxytocin plays in increasing trust during human interactions. The takeaway is simple: to convert more prospects into clients and grow your assets under management, a basic understanding of neuroscience is critical.
The role of emotions
The role of emotions in converting prospects into clients is poorly understood by many advisors. The data, however, is compelling. One study of 1,400 advertising campaigns over the past 30 years found that those with a primarily emotional appeal performed roughly twice as well as those based only on rational content.
Think about this study the next time you launch into a lengthy explanation of the merits of your preferred investing strategy as part of your effort to “educate” clients.
Why is marketing to our emotions so successful? Here’s my theory. Our brains are basically lazy. We don’t want to take the time to rationally analyze complex facts before making a decision. Emotional advertising works so well because our brains can process such an appeal quickly and easily. Although your prospects will likely make a decision whether or not to retain your services based on emotions, research has found they will likely rationalize the decision by convincing themselves they engaged in a careful analysis of the merits.
Unless you understand the powerful role of emotions in converting prospects into clients, you will be limiting your ability to gather more AUM.
Oxytocin increases trust
Appealing to a prospect’s emotions appears daunting. Fortunately, the field of neuroscience has provided ample guidance. We know that release of the hormone oxytocin increases trust in human interaction.
One study sought to measure the level of trust among participants who played a game involving money. A group of participants performed the role of “investor.” They could give part or all of their money to an anonymous “trustee.” The “investor” was told they could earn interest on their money, but they could also lose their investment because the “trustee” had no obligation to repay them.
Participants who were given three puffs of a nasal spray containing oxytocin parted with their money far more willingly than those who sniffed a placebo.
Another study found that “oxytocin increases the ability to recognize differences between self and others and increases positive evaluation of others.”
One critical goal of any successful meeting with a prospect is for that prospect to form a “positive evaluation” of you.
Remember, if you have a question or comment, send it to email@example.com.
© 2015, Advisor Perspectives, Inc. All rights reserved.