You may be wondering how to incentivize people to adopt better financial habits. After all, isn’t making money the goal of many of those who sign up for a new financial service? The answer is that it can be, but only if you offer something of value in return. This is not the same as a discount card, which gives people what they don’t have enough of, like money. The difference is in the value of the good or service you’re providing.
How To Incentivize People To Adopt Better Financial Habits?
An excellent way to provide value to your clients is to adopt a relationship with them on a more professional level. If you’re a financial planner or advisor, this means being available for advice at least a few times per year. This provides value over and above just offering a financial service. When people feel that they’re getting something valuable from you, they’re likely to maintain that relationship, which means staying with your firm longer. This can go a long way toward preventing attrition, which can occur when clients are left feeling like they’ve been cut off from a vital source of income.
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How to incentivize people to adopt better financial habits is also related to the nature of your business. For example, if you work with investment funds, it’s far more difficult to fire someone for poor financial decisions than it would be for, say, a real estate agent. In a financial services setting, an investor can simply cut ties with your company and hire someone else, whereas in the real estate field, things are more complicated. Real estate agents typically have property maintenance contracts with their clients, while financial advisers don’t. If you’re forced to let a client go (because you can no longer afford to pay the mortgage), you could get in a lot of trouble, as your reputation will be damaged. On the other hand, you wouldn’t have nearly the same problems with an investment fund as you would with a real estate agent.
In order to get your clients to change their financial habits, you need to present them with viable alternatives. Sure, you can tell them about the tax benefits of adopting an IRA or other defined-contribution retirement plan. But that doesn’t solve the problem of relying on paycheck stubs to make ends meet. Even if you get them to invest a certain amount, you still have to rely on that money to pay the bills. Offering clients financial incentives to stick with your firm can go a long way toward changing financial behavior.
You may be tempted to tell your clients that switching their financial habits is simply too difficult. After all, what do you have to lose? It might be true, but it shouldn’t be the basis for your decision to help a client to change his or her financial life. If you choose the wrong incentive program, you’ll have nothing to show for it other than a wasted client. Be sure to include plenty of incentives, such as bonuses, referrals, and other types of rewards, to ensure that you get results.
How to incentivize people to adopt better financial habits isn’t rocket science. It’s simply a matter of offering people something in return for their financial behavior. The most powerful incentive may not be an annuity, a pension, or a traditional defined-benefit retirement account. It could be a percentage point cut in your client’s annual fees. Whatever the case, this kind of financial reward should be attractive enough to get most people to follow through on their new financial decisions.