How behavioural economics can transform your clients' financial choices

We’d all like to believe that we can make smart financial choices. Ones that are rational, informed, and aligned to our long-term goals. But the truth is, our brains often get in the way.

Behind every investment decision, savings plan, or insurance policy lies a tug-of-war between logic and emotion. That’s where behavioral economics comes in: a field that explains the real reasons people struggle with money. Not because they don’t know better, but because of how human brains are wired.

Understanding the most common behavioral biases can help individuals take control of their financial futures and help great financial advisers, like you, create better solutions.

1. We stick to the familiar, even when it doesn’t work

Ever kept a gym membership you don’t use, just because it’s been part of your routine for years? That’s status quo bias – our tendency to stick with what's familiar, even if change could lead to better results. In the financial world, this shows up when people do things like avoid switching to better investment products or never update outdated policies. The solution? Make change easier. Insurers should offer flexible products that evolve with life’s milestones, while advisers should regularly review clients’ needs to encourage healthy financial habits.

2. We’re more scared of losing than we are excited to win

You’d think the joy of gaining R10 000 should match the pain of losing it, but it doesn’t. Loss aversion means that losses feel about twice as bad as equivalent gains feel good. This makes people overly cautious or reluctant to commit to financial decisions, even when it's in their best interest.

The key for financial advisers is to reframe conversations around security and long-term growth. Instead of focusing solely on returns, show how investments protect future income or safeguard against inflation. This shifts the focus from “risk of loss” to “loss of opportunity”.

3. We fall for the First Number We Hear

Did you know salespeople show you the most expensive product first? Once you’ve anchored your brain to a high number, everything else seems like a deal. In finance, clients often cling to arbitrary benchmarks (“I’ll take out life insurance when I earn R30 000 per month”). Advisers can combat this by anchoring decisions to real-life goals, like how much school fees will cost in five years, or what’s needed for a comfortable retirement. This grounds conversations, not guesswork.

4. It’s Not Just What You Say, It’s How You Say It

Words matter. According to the principle of framing, people make different decisions based on how choices are presented. A classic example? Saying “90% success rate” versus “10% failure rate”. While it’s the same thing, it has a different emotional impact.

Smart framing can nudge people toward better financial outcomes. Don’t just talk about “life insurance”, frame it as “future financial security”. Rather than highlighting monthly contributions, spotlight the reward at the end of the journey.

5. We Give Different Values to the Same Money

It’s called mental accounting, and it explains why someone might splurge a bonus but pinch pennies from their salary. We mentally separate money into categories. Like “extra,” “bills,” “vacation”, instead of viewing it holistically.

This creates friction when it comes to financial planning. Clients often view financial contributions as a “cost” rather than a long-term asset. One solution is to tie insurance products to meaningful goals: taking care of your family and protecting your assets. When people see the purpose, they’re more likely to commit.

So, What Can Be Done?

Understanding these behavioral biases is only half the battle. The real power lies in designing financial experiences around them. Individuals reflect on their emotional triggers when making financial decisions. Are you avoiding change out of comfort? Is fear keeping you from a solid risk plan?

For advisers, start with empathy. Ask not just what clients want to do with their money, but why. Build strategies that support those deeper motivations.

Behavioral science won’t eliminate financial mistakes. But it can make it easier for consumers to make smarter choices, and you to help them with that.

*  Hanlon is an executive director at BrightRock.

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