Updated: Nov 16, 2018
There is no better way than `Gaming’ & `Story Telling’ to explain a phenomenon.
We choose the gaming analogy here to explain Investor Psychology.
Jumping straight into the game
Think of a Product/Service that you have availed or a Social Event/Party that you have attended and list down 3 things that you loved about it.
Don’t read any further before you do this activity! The entire exercise will be futile otherwise. If you are too lazy to write, try to remember & store these 3 lovable things in your head.
1. Observe `how good you feel about the product or party’ after recollecting those 3 things that you loved about it.
2. List down or recollect 3 additional lovable things about it
3. Observe how good you feel about it, now.
4. List down or recollect 3 more things you loved about it.
5. Observe how good you feel about it, NOW.
End of Game & our Hypothesis
1. Chances are high that you picked a recent purchase/experience to do this case study.
2. You could write/recollect the 1st 3 things you loved, with ease.
3. You would have felt very nice about the product/party, now.
4. You would have found a little difficult to recollect the next 3 things that you loved about it.
5. You would now be feeling a little less nice about the product/party.
6. You would have struggled to recollect the last 3 things that you loved about it.
7. And now you would start wondering if the Product/Party was as good as you initially felt.
8. By any chance, if you have not been able to pick a product/party with ease to do this case study, you would end up feeling uneasy.
How our Brains are wired
1. When we are asked to do an activity, we make an impulsive attempt to do it.
2. The recency bias always chips in, should there be one, related to the activity.
3. Lesser the intensity of the activity, more would be the feel good factor.
4. As it gets intense, your rational brain is activated.
5. The rational brain takes precedence and overwrites the initial feeling created by the emotional brain.
6. In general, our brain system is lazy and almost all decisions are driven by the emotional brain.
Daniel Kahneman has famously put it as `System 1 & System 2’ and how decisions are made.
How does it affect your Practice?
To answer this question effectively, you got to ask another question.
What factors contributes a client’s feel good factor about your services? Here’s a quick help:
Summarized simply, you need to ensure that your client’s Emotional & Rational Brain(s) are positively skewed towards your services.
On the Emotional side:
Your client should be easily able to recollect events/engagements.
"I had this e-mail from my Advisor last week"
"The retirement exercise that I did with my Advisor was revealing"
"I did not know that I could take more risk with my Investments until he showed me that tool"
On the Rational side:
Your client should be convinced with the data that he/she is absolutely on track with their investments
"My investment portfolio returns are 2 times higher than a Bank FD"
"By the time I retire, the MF portfolio is likely to be far higher than my PF corpus"
"Stock Markets are not doing well recently, but my investment portfolio is intact with my goals"
Have Structured, Subtle, Scientific & Stable engagement strategies with your clients. We are wired for New & Regular Stuff. This is where the Robo – Systems have indeed developed an edge with Investor Community.