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Monkeys love peanuts. To understand how that relates to gathering assets under management (AUM), let’s revisit a study demonstrating that emotions drive decisions.
As advisors, we like to believe that prospects make decisions in a dispassionate, objective manner after carefully assessing the merits of our offerings. But this assumption is often untrue.
The role of emotions in decision-making
Emotions have a significant impact on our ability to make prudent financial decisions. One study (reported here) looked at how people with brain lesions made investment decisions. The lesions caused an inability to experience emotions but did not affect IQ or capacity to think logically.
Participants were given a gambling-like task to complete. Through logical thinking, they could maximize the possibility of gain. Of the 41 participants in the study, 15 had suffered damage in areas of the brain affecting emotions. These brain-impaired participants adopted the most profitable approach to the gambling task.
Participants without brain impairment reacted emotionally and, ultimately, irrationally. In short, their emotions overtook the rational part of their brain.
One of the study’s authors compared this result to the behavior of investors when the stock market declines. Many investors flee to safety and abandon stocks for bonds, even though over the long term stocks have a higher expected return. Actually, stocks have an even higher expected return when they have declined in value.
While this study demonstrates how emotions may impair rational decision making, negative outcomes aren’t always the case. Emotions can lead us to the right decisions too. According to one of the study’s authors, "If you look at most of the decisions we make in our lives, emotions are key to their success."
When prospects are considering whether to retain you as their advisor, a significant component of that judgment (for better or worse) will be emotion, not fact.
What monkeys can teach us about emotions
In 1997, Italian neuroscientists in Parma tried to isolate the neuron in monkeys that controls elbow movement. They wired the monkey’s brain with sophisticated sound detection equipment. The monkey was given a bowl of peanuts, and the equipment recorded the clicking sound of the elbow neuron when it reached for the bowl.
One day, a scientist felt an urge to eat a peanut himself. He reached into the cage and took a peanut from the bowl in front of the monkey. At that moment, the sound equipment recorded the activation of the elbow neuron in the monkey’s brain. The monkey had not moved. He was merely observing the scientist reaching for the peanut.
Scientists trace the discovery of what are now known as "mirror neurons" to this event.
Using mirror neurons to your advantage
Mirror neurons in your brain reflect the emotions of people around you. If your small child slips and falls, your brain will record that child’s pain in a manner almost indistinguishable from how your brain would react if you had fallen. Similarly, others in your presence will feel the emotions you convey.
If you feel nervous and insecure in a meeting with a prospect, your prospect will feel that way as well. If you project an image of confidence, professionalism and authenticity, those emotions will also be mirrored.
There's a lot you can do to control the emotions that will be mirrored by your prospect. Here are some suggestions, gleaned from Power Cues: The Subtle Science of Leading Groups, Persuading Others, and Maximizing Your Personal Impact, by Nick Morgan.
Develop body language that reflects energy and enthusiasm.
Greet prospects with a smile.
Look happy.
Sit close enough to your prospect so that it will feel like you are having a personal conversation without invading the prospect’s personal space.
Maintain eye contact.
To convert more prospects into clients, be sensitive to the impact of your emotions on others. This awareness can mean the difference between success and failure.
Dan Solin is the director of investor advocacy for the BAM Alliance and a wealth advisor with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book is The Smartest Sales Book You'll Ever Read. He limits his sales coaching practice to advisory firms that advocate evidence-based investing.
Read more articles by Daniel Solin
