#15 Dr. Gizelle Willows – Transcript

Episode details

SUMMARY KEYWORDS

financial planner, people, client, planner, behavioral finance, money, retirement, financial, behavior, side, nudging, talk, plan, understand, employees, bit, thinking, employers, manage, friends

SPEAKERS

Louis van der Merwe, Dr. Gizelle Willows

 

Louis van der Merwe 

Welcome to another episode of financial planners, South Africa. I’m really excited today to have Dr. Joseph willows with me. She’s an expert at nudging and as a PhD in behavioral finance. She is a chartered accountant and associate professor at UCT, while at the same time running a business called nudging financial behavior. Just now, it’s awesome to have you here.

 

Dr. Gizelle Willows 

Thank you so much for having me. That’s quite the introduction. Well, thank you.

 

Louis van der Merwe 

It is it is it is a mouthful, I stumbled there for a little bit and just trying to bring in everything you fly under the radar, because how I’ve come across your work was actually through the Financial Planning Association in America. And we’re super proud to see the South African flag being flown really high. But before we jump into that, I’d love you to give us a little bit of a background because you didn’t start off in finance. And you had quite an interesting segue. So yeah, share with us a little bit how you got to where you are now.

 

Dr. Gizelle Willows 

Yeah, it is quite interesting. Um, I’m a bit of a hybrid in the sense that my background originally is actually in drama and music, particularly pertaining to theater. But I sort of studied accounting. So I was always sort of balancing between this very artistic side. And what I was doing with accounting, qualified as a chartered accountant, worked as an audit manager for a while and very quickly realized that that was not what I wanted to be doing. So I left that industry, went full time into theater, loved it got lots of work, but slowly started running out of money. So what I did then, was I sort of tutoring part time on a sort of honors accounting program. And as I was tutoring, I realized, this is kind of like acting, except you’ve got a full house every time people actually come to these shows. So found that it was a really good fit for me because I enjoyed the sort of public speaking side of it. And I was well rehearsed in sort of different theater techniques, but also it sort of challenged my intellectual side around the content. So that’s sort of moved into an academic role and started working at UCT, University of Cape Town. And I had always wanted to study further, it was always sort of, on my mind to do a master’s degree. So when I moved over into academia, I did a master’s in finance, which was quite a stretch for me, because my undergrad was purely accounting. So finance is quite technical. But it was great to challenge me. And when I did that master’s degree, there was a module called behavioral finance. And it just made complete sense to me. Because if you think about behavioral finance, it’s one part finance, which is now the things are starting to understand and the degree around the technical stuff and market movements. But the other side of it is psychology and its behavior. And I think I turkey underestimated how much training I’d had in understanding human behavior through all my theater and drama training. Because if you think about what drama is, it’s about understanding humans. It’s about knowing the person that you’re playing, what they keep in the handbag, how they respond to information, how they react to things. And it’s also about listening. I mean, you Can’t be a good actor unless you can actually listen to somebody else. It’s not just about you delivering your lines, it’s about hearing what someone else says to you and how they say to you, and responding to that. So that’s sort of link of behavioral finance just made complete sense to me, and I was sort of sold immediately. And that’s sort of then sort of set apart for me becoming quite focused in payroll finance, I then as you said, I did my PhD, specifically in behavioral finance, and started doing a lot of research in the area, I’ve, in the recent couple of years, sort of, I still do some stuff in the sort of pure behavioral finance space, the sort of move that a little bit to the personal finance as relates to behavioral finance, because I just feel like that’s where we can make a bigger impact. And I believe sort of planners are at the front end of dealing directly with humans. So it’s sort of where I feel I can probably make the biggest impact given my background. That’s my story.

 

Louis van der Merwe 

That’s brilliant. I’m sure everyone listening, the financial planners out there are going to be very excited, because typically, we see behavioral finance come from the asset management side. And there’s very little, I think arming us to deliver better advice to when you say you kind of shifted into the personal advice side, what was it that was pulling you in that direction, as opposed to the kind of investment return asset management side,

 

Dr. Gizelle Willows 

as opposed to, you know, when you’re in academia, and you’re doing research and you publish research, it’s great, and other academics read it, and you get cited and people talk about it. But I sort of felt this this nudge, urging to just try and make a bigger impact with my work. And I just didn’t feel like the things I was doing around market members was really making an impact, it was sort of understanding what’s happening in the market, but it wasn’t actually helping individuals to be better around the money. And that’s been sort of I then moved to that personal finance space thinking about, okay, let me just delve a little bit in what I can do over here. And I quickly realized that, you know, there is an audience for personal finance and behavioral finance and the link around that, and I get a lot of traction on it. And I get a lot of queries and a lot of interest in my work. So I’m still publishing it from an academic point of view. But the ability to disseminate it and have it actually make a difference somewhere, it’s just so much greater. So it’s got a greater appeal for me in that sense.

 

Louis van der Merwe 

So that pool of people that can resonate with is actually much bigger. It’s not just the people that are of super worried about the behavior around the investment portfolio, it’s the everyday things. And you know, if I got this right, that the title of the FPA award for the best paper that I received was for one called developing a retirement plan and sticking to it. And I think that stick to it is the key point. But I’d love for us to unpack that a little bit.

 

Dr. Gizelle Willows 

Yeah, sure. So that paper, what we’re trying to do with it, we were trying to figure out what makes somebody have better financial behavior, right. And so good financial behaviors, things like you know, paying your bills on time, considering affordability before you buy something that’s sort of good financial behavior. So we’re trying to figure out what were the things that made someone behave better financially. And we surveyed a bunch of people and asked a variety of different questions, things that we could work out their level of financial literacy, how much they thought about retirement, whether they were planning for retirement, their attitude to finances, a bunch of different things. And then we sort of looked at care which one of these things are potentially predictive of better financial behavior. And the thing that came out was what we called the type of planner that person was. So to explain to you what what we mean by the type of planner, we use this framework from Anna Marie the side and Olivia Michel, where you assess the type of planner someone is. So for somebody who’s tried to figure out how much they’re going to save for retirement, we call them a simple planner. If they had developed a plan to do that, we call them a serious planner. And if they actually stick to that plan, like you said, they stick to the plan, then we call them a successful planner. And it was these successful planners that had better financial behavior. So now the sort of rabbit hole of research case. So now we know successful planners tend to have better financial behavior, but what makes somebody a successful planner. And so for that, we then asked the different types of planners, you know, what were the tools that they used when they tried to develop a pamphlet to determine how much to save and to stick to that plan? And, you know, we gave them sort of options, you know, did they talk to family, friends, coworkers, they tend retirement cinema seminars, they use calculators, worksheets, or did they consult with a financial planner was one of the options. And that was the winner. It was found that the odds of somebody being like a more successful planner was significantly higher if they’d actually consulted with a financial planner. You might be interested to know that talking to co workers and friends is actually a negative indicator of being a successful planner. But that was it, when we looked at the link of chain of things it was if you consult with a financial planner, you’re more likely to stick to your retirement plan. And that means you are then a successful planner. And then that means that you’re going to have better financial behavior. And I think the thing that was quite interesting from this finding is that I mentioned at the start is that we did ask questions to work out someone’s financial literacy. And there’s a lot of research, they talking about the importance of financial literacy, and I’m not for one second saying it isn’t important, and it doesn’t need interventions. But when our research showed was there just there’s something else that you can be more direct about, it wasn’t so much financial literacy that were shot showing having these big indicators, it was just the simple act of consulting with a financial plan and being in a relationship with them to develop a plan that’s going to have all these positive indicators and improve your attitude to money or behavior with money. So it was sort of like it was a good news story, you know, was research with the NGO girl, okay, that I like that answer, you know, I wasn’t expecting it. But that’s a really cool answer, like I like it. So I think that’s perhaps why it’s gotten the attention it has, because it makes the financial planners happy,

 

Louis van der Merwe 

you’re it would have been very sad if it came out that people were worse off with financial planners. And now we have this body of knowledge to say that actually, you know, it, it depends on the type of person that you’re dealing with, like you influence from your family and your friends is actually is a negative predictor of these financial outcomes. What like, what is your gut feeling? why that is?

 

Dr. Gizelle Willows 

Suppose you got to ask yourself, do your coworkers and your friends actually have the expertise to advise you on appropriate financial plan? You know, we talk about all these the softer sides of financial planning, but at the back end, you’ve got a financial planner with expertise, they understand portfolio diversification, you know, they understand things around putting together an appropriate plan. So while I do spend a lot of time talking about things like you know, manage your clients emotions, manage your own biases and things like that, it’s on the assumption that the planner actually has the expertise and that the technical know how. So I mean, you might have a co worker friend who has that, but I think the chances are slim, and we also carry a lot a large sort of confirmation bias as humans. And so we tend to sort of talk to people who have the same views as us. So our coworkers and friends that we probably would go to, to talk about finances are going to probably be the ones that think like us around it, which isn’t really giving yourself diversified advice, whereas a financial planner, at least should be more objective, and consider your unique special needs. And sort of give a bespoke plan for you specifically, is my

 

Louis van der Merwe 

almost like herding This is the type of advice that that we would follow. And also just, I guess, copying and pasting, saying, this is what’s working for me, therefore, it should work for your retirement plan. And we strip out those two pieces, you know, the one is developing a plan, but most importantly, it’s also sticking to it. And adherence rates are really low. It’s like less than 20% of people actually get through to sticking to their plans over the longer term. And what did you What did your figures say around that kind of how did those groups break down into people that were actually able to stick to the plans?

 

Dr. Gizelle Willows 

I mean, I can’t speak specifically for the study, because we didn’t ask questions around what made them stick to just the tools they used. But for some of the other stuff that I’ve been sort of looking at, I think a thing to really remember is that relationship between the planner and the client, you know, time comes to a planner, and they get a financial plan. And then that’s the anchor that they’ve got to move forward from. But what happens after that, you know, what happens when circumstances change, it’s not a one off product. And that’s really something where I think financial planners can tap into better understanding around the relationship with a client, if they develop that relationship and have a lot of trust between planner and client, I think there’s a great opportunity for clients to walk a road with a financial planner, their entire life for the whole family to walk around with a financial planner. And I think it’s those constant check ins and that relational situation between the two that can actually set you on a greater path for success than if you’re just doing it as a sort of one Sophie as your plan and go kind of thing.

 

Louis van der Merwe 

So it almost becomes like the family GP, exactly the whole family goes to if there’s a financial emergency or even against financial plan procedures that are coming up. But we spoke about this in a call previously that the branding of financial planners is probably not friendly enough for those type of relationships to exist.

 

Dr. Gizelle Willows 

Yeah. And it’s, it’s a pity, you know, and, you know, not a financial plan is not a financial planner. I mean, everyone’s gonna be different in how they approach their service offering. But I think there is sort of a negative reading out there because there tends to be the assumption that you know, someone is going to try and sell you a product someone’s just trying to make commission off of you. Someone’s just taking a template and they go and copy Paste in, it’s for you, which may be some financial planners are doing. So it’s probably out there people are making this assumption. But there’s there’s an opportunity to sort of change that entire branding and making it more about an individualized experience for the client, which I know is going to take more time for the financial planner. But it’s really about being careful of rule of thumbs and making a client feel like, Okay, this person is listening to me, they understand my unique situation, you know, they’re not just trying to sell me a product, because maybe a product isn’t the right answer for this person. It’s not about a client coming to a planner and having a problem. And the plan is solving the problem, it’s about actually helping the client and focusing on the client rather than the problem itself. Because if you focus on the client, then there’s a trust relationship when the problem solves itself automatically. So I think there’s an opportunity for that to happen. I think another way where planners can perhaps be a little bit more individualistic with their clients is thinking about the language that they use, not in a linguistic sense, but more like the way they frame things for their clients. So instead of thinking things about things through sort of your point of view, consider what you’re saying, through the lens of how the client sees, you know, so how they use certain terms and what their fears are, are their legitimate fears. And you need to sort of sort of break through your own understanding of what things isn’t, rather frame it in something that makes sense to the client. And I just think, you know, I’m not saying it’s gonna be something that’s easy to do, it’s gonna start with a few planners, but word spreads very quickly, you know, and I think once that sort of perception changes, that the majority are no longer focused on product, but the majority are actually focused on me. And what’s best for me, I think that word will spread. And I think it can it as a great opportunity to change the branding of what financial planning actually is,

 

Louis van der Merwe 

I completely agree with you, I think that there’s a concept called integrated financial planning, which marries external financial planning the products and the numbers with internal financial planning, right, how you feel about your money, and what are your fears, your hopes and your dreams, and it’s the marriage of those two, it can’t be one or the other. It’s a combination of the two, you speak quite openly about the role that employers has to play in this, and I’d love for you to just unpack a little bit and how you see they fit into the financial planning relationship,

 

Dr. Gizelle Willows 

I just think employers have a greater responsibility that they may be wanted much, you know, and there’s been a good move over the last couple of years where I think employers are thinking about, you know, the physical wellness of their staff, and then they’re thinking about the mental wellness of the staff. And that’s great. But what about the financial wellness of the staff, so, I’m a big advocate of like, financial wellness days in whatever way the business needs to be. But for one, you know, business need to have, you know, appropriate systems set up in place that, you know, their staff have offerings and benefits that, you know, they can afford, that the company can afford. And the staff needs to be given different, who don’t want to say training, but it just depends specifically on what the employees are like, and what the employees are going to need. But they need a little bit of support, you know, they need to understand the pay slip, I feel like most people don’t even understand how to read the pace of what’s sitting on it, they need assistance to understand the pay slip, they need the employer to sort of help them with appropriate defaults and tools for saving. And they need a little bit of assistance and how to manage their money on a monthly basis. And, you know, I just think there’s, there’s a responsibility there for the employer to help their staff with that and give them that sort of leg up to potentially manage their money better and just be better financially well off,

 

Louis van der Merwe 

Susan’s zooming out a little bit and saying, don’t just focused on the employee benefits the Retirement Fund and the group cover but actually saying, How are you managing your money as an employee?

 

Dr. Gizelle Willows 

Yes, and it’s both I mean, the sort of group benefits are important. And then he’s have appropriate default set in place and the employees perceptions of changes of those needs to be managed. But it’s also the day to day it’s from when they received a pay slip on one day in the month to when they receive their pay slip on the next day of the month. What’s happening in between those two are there because I mean, there’s loads of literature that just talks about how employees if they better have sort of that they don’t have financial anxiety, they better stuff, they’re more productive, they’re happier, they work better in teams. I mean, it’s just a win win. Financial anxieties is stressful, and it’s damaging to your mental health and your physical health. And so I just feel that there’s a platform there that employers can tap in and just, you know, do a little bit more

 

Louis van der Merwe 

and wondering if it doesn’t start with actually measuring financial anxiety better within the employer groups and saying, Okay, now we have a benchmark. Now we can start changing what do we just assume? Financial anxiety is really high. And whatever we do is going to reduce that number.

 

Dr. Gizelle Willows 

Yeah, I mean, the measuring is important. And that’s why when I said training, I was like, Oh, it’s not really training, because it depends, you know, it’s not going to be the same for every company, it’s not going to be the same for every employee, because employees sit at different levels with different financial stresses and anxiety. So it’s about considering specifically for your employees. And sometimes I say, look, you know, we can’t look at all your employees in one go, we got to break them up into different buckets, because different employees are needing different things right now. And it’s dependent on what their needs are, which could be a range of different things. But But to answer your question, in short, yes, financial anxiety is going to differ from person to person

 

Louis van der Merwe 

who almost feels like we’re saying, hey, let’s create a target audience within our business so that the employee becomes the client. And we’re going to market to them to help them deal with money better. And I think that’s something that very few businesses have implemented successfully. Have you seen businesses that have done this really well? And and what has the impact been?

 

Dr. Gizelle Willows 

I mean, I haven’t, I haven’t seen businesses do it really well. I mean, I’ve seen businesses who have really strong sort of retirement benefits medical aid schemes in place, I’ve got an HR partner that I work with, for some of those things, I’ve seen companies over those that are that are set up really well. But then I find that they lack on the communication side and the default side for it. And then I see I see businesses that are sort of bind to the concept of financial literacy. So they bought, you know, but help my staff understand inflation and compound interest and how these things work, because they tried to borrow money from me the whole time. But it’s, it tends to be quite narrow between those two things and sort of misses the middle ground, which, you know, in a defense, I think many people miss the middle ground, which is just the behavioral side of us, it’s the emotional side of it, it’s how you feel about money, how you feel after you spend money, like, you know, it’s just it’s so different from person to person. And that’s that behavioral element that sits in the middle that I just think there’s not employees, specifically, I think everybody is not giving it the attention it deserves.

 

Louis van der Merwe 

And is that one nudging financial behavior was born,

 

Dr. Gizelle Willows 

probably that of a given

 

Louis van der Merwe 

all these pieces together and say, Okay, this is a balanced approach around your benefits and your communication and nudging people. And often the feedback that we see is that, oh, we must just increase salaries, because then people will, will save more, because ultimately, that is a big objective of employers to get the people retirement ready and stick to plans. What are the more kind of practical things that employers can do when they their budget is set for the amount of money that they can be spending on their people, but they want the employees to still be contributing more towards retirement.

 

Dr. Gizelle Willows 

I think, you know, employers can make aware of what other things they are that their money can go towards. I mean, I’m a big advocate of saving for retirement. But it’s not the only thing. I mean, there’s your education, there’s your children’s education, there’s lots of things that can help you be better financially off in the future. That’s, that’s not only retirement savings, but it’s about considering what else your particular employees might need. And perhaps bringing that into the business as any beat up on the businesses, books, that can be an outsource thing, but have that available for them to invest in in a different way. There’s a lot of, you know, if I think about how the the Singapore model works for retirement savings over there, there’s a big push towards allowing the savings to be just as discretionary as possible, you know, so we got to be careful with having, I mean, automatic stuff is important, right? So you got to have things automatically going off. But if you flip it a little bit and give the employee or the client some kind of say in what they want their savings to go towards, that doesn’t feel like the sort of grudge thing, okay, it’s just going towards my retirement. But okay, this is going towards my educational my children’s education, it has a sort of byproduct byproduct of educating the client or the employee, because now they’re understanding better where their money is going, and where the outcome of that money it’s gonna be as opposed to retirement, which is like this complex thing that nobody understands. So I think it’s about thinking about what else your employees need, and asking your employees, what else do they need asking employees, you know, do you want to be saving more, and then we talk a lot about saving and pay. But spending is a really important leg that we also need to talk about, because it’s actually about monitoring your spending behavior, which, which has a much greater indicator of where you’re going to be in the future than monitoring or saving behavior, in my opinion.

 

Louis van der Merwe 

Well, that’s as you mentioned, quite a few things there. The one thing that jumps out at me is trying to bring that kind of really long delay gratification a little bit shorter, instead of saying, you have to wait 40 years to actually get some benefits from your retirement. You have Some control around improving the future self. But be it maybe in five years time instead of such a massive, massive jump, because isn’t that kind of the crux of most of the delay gratification is just so far out that we can’t see it benefiting our current self?

 

Dr. Gizelle Willows 

Yeah, absolutely. And so it’s that element of recorded hyperbolic discounting, where we battled to see the value of something so far in the future, but we can see it right now. So bringing it forward does help as long as it’s springing forward for something that is an investment in the future, like education is a good example of that. The other thing is just, it’s something that the person might value. And so if that person values that thing that they’re going to get paid for in three years, they’ll, they’ll invest in it, they’ll want to keep to it. I mean, come on, I mean, even me, like saving for retirement, it’s like, the most mundane thing to do, like I just, you know, I mean, I know I’ve got to do it, but it’s just so and it’s not exciting. It’s not if you want to be doing so you’re sort of changing it to something that somebody can, can buy into can succeed with. And then at the end of that period, they have succeeded, and they get the fruits of that. And then they start buying into the process of actually saving. And that’s when you can start, you know, dangling the carrot a little bit further, and perhaps sort of nudging them into particular boxes you want them to be

 

Louis van der Merwe 

you’re building those good financial habits, and then saying, Okay, now that you’re in, you’re used to saving and you’re used to investing and like you said, you’re used to managing your money, right. Which is, which is the difficult part, I think a lot of financial planners don’t want to get into managing someone’s spending and their budgeting plans. And I’d love to hear your take on where that balance is between trying to get someone to fit into a budget versus helping them and nudging them in the right direction.

 

Dr. Gizelle Willows 

Yeah, well, you know, I’m not sure whether it’s the planners responsibility necessarily to help them with spending and sticking to the budget. But I think it’s a vital importance. I mean, it’s, if you want to do any sort of projected model and see how somebody does in a couple of years, you’re going to find the biggest leap by reducing their expenses, as opposed to increasing their income. This speaks to a little bit something different about how I think we we get it wrong, when we try and measure what enough money is, at the end, we focus too much on income, we should focus more on expenses. But it’s something I think financial planners should at least be aware of, and something where, you know, they can, you know, either think about delving into that side of managing the budget better, because like we said, it’s a relationship that should be ongoing, there should be touch points along the way. And a financial planner doesn’t have the skill to do that, or the time to do that, you know, somebody else can be brought in to potentially help clients with that process of actually sticking to that budget month to month.

 

Louis van der Merwe 

Yeah, because you you want to protect that lifestyle, and that all talks to spending. And I think it makes complete sense to bring that in saying, Well, how do we ensure that the lifestyle you live now is the same lifestyle, the future? Or, you know, even better? If that’s what you’re planning for?

 

Dr. Gizelle Willows 

Yeah, definitely.

 

Louis van der Merwe 

Just all you are super active in terms of kind of the content that you’re putting out on your blog and your weekly emails are very entertaining. What has resonated the most with with people? What are you? What are you seeing that standing up?

 

Dr. Gizelle Willows 

confirmation bias? Like, I don’t know why I caught that blog, why you can’t argue with a vegan, but I think it just made everyone is a vegan or knows a vegan that just made them read it. And it’s been so much fun, actually. But it’s just a bias that I laugh at, because we all have it, I have it I see myself like, you know, falling prey to it all the time. So I think that’s had a lot of interest. Yeah.

 

Louis van der Merwe 

Yeah, that’s, that’s so true. And as financial planners, I think our confirmation bias is probably like one of the highest rankings within within the industries and like, what can you do to reduce your confirmation bias?

 

Dr. Gizelle Willows 

You need to one first acknowledge that you have confirmation bias, right, acknowledge that it exists there. And everyone can do that right now taken moment acknowledge that you have confirmation bias, right? Then, whenever you need to make any type of decision, like a big decision has to be every type of decision, but big ones, you know, like a decision around how you raising your children, what you’re going to eat, and big financial decisions. Consider all the information right, there’s going to be sort of a an answer that you’re always going to be leaning to be at what your gut feels right or what your friend or your coworker told you. That’s what you’re going to lean towards. But before you actually act on it, just go Okay, this is a big decision. I know I’m getting towards this. But let me just go and find some information that says the opposite, just you know, go on to Google and search for something that has the opposing point of view, taking that information and then decide how you’re going to move it and and I do this a lot with sort of my investing decisions. So I’ve got a friend who has a completely different outlook. On Me as to how you should invest. And we argue about investing all the time. But whenever I make a big investment decision, I found this person and I tell them what I’m thinking of doing. And I know that they’re going to disagree entirely. And they’re going to tell me why they disagree. And I listen. and nine times out of 10, I still do exactly what I was gonna want to do, because it’s my core investment principles. But there have been those occasional moments with a friend of mine has just said something that’s made me go, okay, no, wait a minute, let me just go and read up a little bit about this. And then it’s actually made me not go forward of what I thought I was going to do. And so I think it’s important to just be aware of where you perhaps more susceptible to it. If we think about how things play out in in businesses and leadership positions, you got to be careful of, you know, leaders that surround themselves with people that are like them, you know, same age, same gender, same race, same religions and qualifications, because they’re all going to think the same, you know, so as much as we’d like, I mean, I don’t want to, like be too harsh about it, it is nice being around people that are like you, right, that agree with you. And that’s all we have friends that are like that. But when it comes to, you know, important business decisions in this example, make sure you have people around you that think differently to you that have a different life experience. Because it’s going to challenge your viewpoint, which Yes, is challenging, but you’re going to make a bigger decision at the end of it.

 

Louis van der Merwe 

Wow, there’s so much. A lot of it resonates with me in terms of just slowing down and saying, okay, have I considered all of the information, but then at the same time, you can get stuck in just looking at more and more and more and more information? So then how do you still keep yourself accountable to make a decision, and not just do nothing?

 

Dr. Gizelle Willows 

Well, I mean, if a decision needs to be made, it needs to be made. So I mean, I wouldn’t say necessarily go to these measures for every little decision we make. Because as it is, decisions are difficult to make, and we don’t like making them as humans. But you know, if you need to decide what school your child’s going to where you’re going to invest your bonus that comes gets paid out to you. You know, those things are decisions have to be made. So, you know, hopefully you’re doing it, you know, with a partner, you’re talking to a planner, and somebody is holding you accountable to it. But it’s all those big things.

 

Louis van der Merwe 

Yeah, yeah. And that also brings in to the fact that, you know, as a financial planner, you have your own bias. And then your client comes, you might just only be confirming what they really have and trying to take that opposing viewpoint to say, Well, what else is there for us to consider? And what are the other things that we haven’t? haven’t thought of.

 

Dr. Gizelle Willows 

And what you got to be careful with with clients is because your clients are going to have confirmation bias, and you probably know better. And you’ve got to be careful of automatically diving into challenging it right? Because now I’ve told you, you need to challenge yourself. And you know, you need to challenge yourself. But it doesn’t necessarily mean that your client wants to be challenged immediately, right? It’s relational, it’s building trust, so you don’t challenge immediately you sort of let your client have confirmation bias and understand their confirmation bias, and try and work around it to start, not everyone’s ready for it.

 

Louis van der Merwe 

So it’s the contracting and also to say, you know, this is what the relationship is going to be like, expect me to challenge your assumptions and the things that that you bring into the table. And once again, it’s just the softer, more human side that’s coming through so that we can actually use that and use behavioral finance to our benefit and not just stick it into kind of investment decision making.

 

Dr. Gizelle Willows 

Correct, yeah, and check in with your clients how much they want to be challenged. You know, some people are happier with people just making decisions for them. And just going ahead with it, they just trust immediately and they give autonomy to the planner, other people want to be involved in every single step, and they want to double check everything and phone a friend and make sure it’s right. But it’s about, you know, deciding upfront how they want that relationship to play out. And we talk about, you know, managing these biases, but it’s not so easy as just managing a bias is there still going to be there? And you know, people I don’t think people come to your financial planner to get like a session with a psychologist. That’s what you pay for. But it’s about having just that awareness of where your your client is responding in a way that is clearly because of an underpinning bias, not necessarily fact.

 

Louis van der Merwe 

Yeah, so true. I’m wondering what piece of personality assessments come in here. Were you saying actually, well know how much your client wants to outsource and know how much they want to be challenged? And also have the skills to, I guess, manage that better?

 

Dr. Gizelle Willows 

Yeah. I mean, they are sort of frameworks and personality tests that people do use for these things. And I’m not particularly for or against them. I think some work better than others. But, you know, your, your client isn’t going to a robo advisor, where a personality test can just be pasted on the screen and they can fill it in and then the robot advisor knows who they are, and they can just carry on from that they’re seeing a human planner. And that means that the sort of onus in becomes on you as a human planner to treat your client as a, as a human client, not somebody that can answer a questionnaire, well, and I say this, I mean, I use questionnaires and my stuff all the time. So be careful of knocking questionnaires, but I mean, questionnaires are biased, and they don’t get everything right. I mean, particularly question is that, you know, ice people, how are they going to feel after they lose money? I mean, nobody knows how they’re going to feel after they lose money until they lose money, like you can’t, you can’t assess how you’re going to feel about that. So I think to really accurately measure these things, is is difficult. I mean, they’re there, I can say this, there’s ways that are better than others. But it’s never going to be perfect. Whereas I think there’s the opportunity again, there for the planet, to rather upskill themselves around these things, and be able to read their client and listen to a client and just slowly tick away asked questions, read their body language, see how they respond to something A month later, when sort of news comes out around something? What are they doing, and just slowly, slowly, figuring out who your client really is. I think that’s way, then it’s you, I mean, then then the client is in there, because then you’re, you know, you get people are growing, and I’m not going to go to any other hairdresser ever. Because my hairdresser is the best and you know, does a perfect job, I’m not gonna change hairdressers, it’s gonna be like that, because they get to know, my financial planner knows me. Like, they know, I freak out about this. I know, I get excited about this. I don’t want anybody else to tell me what to do with my money. That’s what you’re often.

 

Louis van der Merwe 

I love that. So we throwing away the risk tolerance assessments and having proper conversations to preempt these things.

 

Dr. Gizelle Willows 

Yeah, I mean, like, they still they still place for these things. I’m not saying don’t don’t throw them out. No, you need them to some extent. But there’s an additional layer that you add, as the planner, as the human planet is an additional layer. And you’ve got to just be cautious when you see the output of these things and just go does it make sense?

 

Louis van der Merwe 

Yeah, from what I’ve seen, there’s been quite a few clients where what they say and what the assessments come out differ vastly. And those tend to be such valuable conversations trying to unpack Is this a learned behavior? Or is it something that was in ingrained over time? And where does it come from? You know, like, your, your hairdresser doesn’t just ask you. Okay, what am I going to do today? And there you go, even though you get those types of addresses? Yeah. There you go. I guess it’s back to what type of financial aid racer you require, at this stage and where you are in your life?

 

Dr. Gizelle Willows 

Yeah, yeah. I mean, a lot of those behaviors, like you say they are learned behaviors, were socialized into different roles. And that’s gonna see how your childhood and the way your parents manage money is probably one of the biggest factors that’s going to influence the way you manage money. And you can’t change somebody’s childhood, you can’t change the way they parents manage money and what their financial situation was like growing up, but you can understand it or try to understand it and acknowledge it, and work from that forward.

 

Louis van der Merwe 

I love that phrase to say is this serving you always this year, right to say, this is the behavior become aware of it, and we need to slow down and unpack it and and this all fits in the behavioral finance. So it’s, it’s much more that kind of awareness around our behaviors and then deciding, you know, do we need to change it as opposed to just starting off saying, reduce your confirmation bias automatically?

 

Dr. Gizelle Willows 

And I’ll give you an example of this with myself. So I am mental accounting is my kryptonite, right? I mentally can’t everything to me, money is not fungible, right, I have, I have money for food, and I have money for entertainment. And then I get upset with myself on overspend on eating out, but then my grocery budget comes under, can you see how that makes no sense because it’s the same money. But I do it time and time. And again, and I’m okay with that. Because I grow, you know, at least I have a budget and I know how much money you have for food, and I know how much money I have for eating out. So I’ve got mental accounting. And what I’m doing is I’m not trying to manage my mental accounting. I’m not trying to just make all my money as fungible as possible. I’m going No, I have mental accounting, and I’m gonna work with it. It’s like a coping mechanism for me. And I think that’s fine. We don’t have to manage every single bias. Some of them, we just live with

 

Louis van der Merwe 

us who is using that to kind of work towards the areas that you would struggle with a little bit more. And they often spoke about the envelope system, right? Someone having some money in the envelope and saying if that money is used, then it’s finished.

 

Dr. Gizelle Willows 

If there are no bags, I would be I’ll be using the envelope system I can promise you,

 

Louis van der Merwe 

like, yeah, this is great. I mean, there’s so much information I think we often kind of just apply it to investment management or we have to I think really far to start using behavioral finance. But I guess a lot of this work was also kind of brought on from Richard Thaler. And it’s probably where your nudging comes into, into play. And now this body of knowledge is just growing and expanding and expanding. Is there anything interesting that you’re excited about that’s in the pipeline that you might be working on that you could share with us?

 

Dr. Gizelle Willows 

There is something interesting, there is this sort of study I’m doing where we’re speaking to black Americans or women in Cape Town, to understand how they view retirement and retirement savings. And this comes off the back of a lot of research and research that I’ve done myself, which is really quantitative and quite myopic, in the way it measures retirement savings, you know, it sort of looks at how much money you have put away in a retirement account at the discretion of mountain, that’s how much you’ve saved. And if it’s enough, it’s enough. It’s not, it’s not. And it just sort of ignores all these other sorts of cultural dynamics that come to money. And, you know, we see this happening in Japan quite a bit. And this is what we why we’re doing the study, because we could see it happening South Africa as well, where the, the notion of retirement savings is very different in different cultures. And so while research puts emphasis on self and individualism, culturally, there’s actually an emphasis on community. So we sort of speaking to this woman and just having sort of very informal conversations around the viewpoint of what have how they see retirement for themselves financially, and whether they think they’re going to be okay or not. There’s, they say things happening there that we don’t know how to measure, right, we don’t know how to put them in a model. And we don’t, we can’t attach a number to it. And that makes it difficult for us. But there are these other things that we potentially just need to be more aware of when we talk about retirement preparedness of different people. So that’s, that’s quite exciting. I maybe have spoken out of turn, but when I write it up, I will, I will share it with you.

 

Louis van der Merwe 

Wow, that that sounds wonderful. And I think this, this old concept of how much of your final salary, can you replace, as an indication of how the quality of your retirement is going to be is very outdated globally, and then within South Africa with and we have our own challenges? And are our own problems to unpack? So are you saying that we should be looking at the quality of retirement a little bit differently, as opposed to just a financial measure, measure on issue going to make it or no, you’re not going to make it?

 

Dr. Gizelle Willows 

Yes, looking at the quality of retirement, but also looking at what support someone has wronged them. And in the sense that we look at a person individually, we maybe look at a couple together, but we don’t look at the greater extended family, and we don’t look at the community and how they potentially going to support someone in retirement. And it’s this whole notion of, you know, globally the refer to it as family tax, and yeah, refer to it as black Tex. And it’s got good and bad connotations, depending what side you’re looking at. But it’s a it’s a stronger measure than I think a lot of people actually think it is. And it’s something we got to take into account, when somebody says to you, like my children are my retirement, we can’t just knock that off and go, No, they’re not, you must save for your retirement because for some people, their children or their retirement and investing in their children’s education is what they’re going to want to do, because they want to set their children up for success. And we just need to, I’m not saying one is right, and the other is wrong. We just need to be aware of these things and take them into account. And the thing you mentioned about that replacement ratio of you know, that’s sort of the measure we use, I mean, that’s also usually problematic. And like you say, it’s used globally, and I’ve used it in loads of research, because it’s an easy number to get right. It’s easy to go and work out this is how much money someone has this is the annuity they’ll get this is what their salary is. So that’s their replacement ratio. But it is arbitrary. And it’s it’s illogical, right? Because how much you earn has got nothing to do with how much you need or how much you spend. I mean, yes, there is an element of lifestyle creep in the sense that the more you earn, the more you’re likely to spend. But your expenses are a greater measure of how much you’re going to need. There’s that rule of 300, which the fire advocates talk about, which is basically the reverse of that 4% rule. And that’s a great indicator, look at how much you spend on a monthly basis times that by 300. That’s how much you need. I didn’t even use your income there. I didn’t even ask you how much money you’ve saved. I just asked you, how much do you spend? And that’s really the thing we need to be looking at. And that’s the thing that I think Pat is can at least have that conversation with their clients, like just plant the seed. You know, I’m interested in your expanding behavior, as opposed to people thinking planners just want to know how much I earn and how much do you know what my assets are? take an interest in That spending side of it because, as I said previously, that’s really where you can make a big difference.

 

Louis van der Merwe 

I love that quality of your retirement phase. And this, this number of 6% of South Africans can retire financially comfortable. And I’ve often grappled with that, because yet 100% of all people retiring somehow make it, figure out ways of family supporting them, and, you know, might not be ideal, and it might not be 100% repaid. But the rule of thumb is probably broken when we’re saying you have to have 75% of your final salary as a replacement. Yeah,

 

Dr. Gizelle Willows 

there isn’t a rule of thumb for this is rule of thumbs for many other things around what you do, and when you’re modeling. But there isn’t a rule of thumb for this, it’s it’s unique for every person.

 

Louis van der Merwe 

Yeah. And that’s probably why it’s so powerful working with a financial planner, because this is personal, because this is unique. And we’ve gone full circle, saying that, you know, back to the simple series and successful planners, the people that had a really good outcome, and that were successful, worked with a financial planner, specifically, not family and friends, to have the individual plan and hold them accountable and guide them and hold their hand through through this process.

 

Dr. Gizelle Willows 

Yeah, and then coming back full circle, but it has to be planners that we trust, and planners that I know, are listening to me and understand what I want and what my fears are, what my goals are, and a building relationship with me. And that’s where that whole perception, the branding around financial planning really needs to change. Because then you ticking the boxes, then both partners and clients, they’re, they’re on the road to success being successful planners.

 

Louis van der Merwe 

So the next time you go for a haircut, you might see your financial planners next to you.

 

Dr. Gizelle Willows 

I don’t know where that came from, it was just the first thing I thought of I thought Who would I never leave, I was like my hairdresser. I’m like, it doesn’t matter where I moved to I’ll come back from my hairdresser.

 

Louis van der Merwe 

That makes so much sense. I mean, we acquainting it with medicine and psychology, but it can be more fun and more approachable, it doesn’t have to be this kind of boring topic that that people hate to go to, like the dentist. Together.

 

Dr. Gizelle Willows 

It should be an exciting experience, you know, you know, obviously, you know, people have different earnings. And you know, not everybody even has the opportunity to go see a financial planner. But the people that can see a financial plan are the ones that do have some some finances that need to be planned for. And so it should be an exciting experience. It should be, you know, somebody’s feeling like, you know, I’m gonna make this money grow, I’m going to like put this where magic happens, it should be exciting. It shouldn’t be something that’s, that’s fearful. And I think if you like and you trust your financial planner, you don’t need to be hanging out with them. But, you know, if you like, and you trust them for the service that they’re giving, I think it can be an exciting relationship.

 

Louis van der Merwe 

You get to align your money with your life. And isn’t there isn’t anything more powerful than that? Just Oh, I know that you’ve got some upcoming talks with humans under management. Can you share with us what your topic would be? I can’t.

 

Dr. Gizelle Willows 

No, I’m actually I’m talking about. I’m talking about risk, like how we define risk, and risk tolerance questionnaire, which I’ve already alluded to. So yeah, I’m gonna talk about the problems is the risk tolerance questionnaires. And I’m gonna just try and give some alternative explanations for how we define risk and how we can perhaps talk to our clients around them, loss aversion and things around that, but that’s what I’m gonna say. That’s what I’m saying.

 

Louis van der Merwe 

If you’re a financial planner, and you’re listening to this, make sure not to miss this. We’re not going to give away the answer. Maybe it is keeping some of the risk tolerance assessments and using the information better, but I can’t wait for that talk. It’s going to be it’s going to be a lot of fun. And the panel is great. Where else can people get hold of you? What’s the best platforms to reach out to you?

 

Dr. Gizelle Willows 

I suppose me personally, LinkedIn is probably your best place to find me. So people want to get with me directly. They can connect with me there. Otherwise, I’m contactable through the business which is nudging financial behavior.com. So all sorts of things around, what we can do is on that site, and the blog can be found there. So you could sign up to the mailing list and then you’ll get sort of funny emails from me occasionally. So yeah, that’s sort of where I’m most of the time and we can get in touch with me.

 

Louis van der Merwe 

Brilliant. Thank you so much for spending the time with us today. It was a lot of fun. And the work that you’re doing is great. So please don’t stop and board financial planners throughout these journeys and give them the tools to deliver better advice.

 

Dr. Gizelle Willows 

I will try my best