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Review: Why do People Fail to Act on Financial Plans?

First report from Behaviourally Informed Organization addresses – and poses – information gaps

Why do People Fail to Act on Financial Plans, the first published report by the Behaviourally Informed Organizations partnership, takes a behavioural approach to help financial planners address two common issues that prevent Canadians from proper financial planning.

The report identifies two gaps, an inaction gap that keeps some from planning at all and an implementation gap that prevents those who have written plans from implementing them.

The BI-Org partnership includes 18 partner organizations, including the Consumers Council of Canada. The report was produced by the Behavioural Economics in Action Research Centre at the Rotman School (BEAR) at the University of Toronto.

The report presents a number of immediate benefits. It’s attractively designed, not too long with a 30-page “powerpoint-style” presentation format, and well-organized.

The report’s diagnosis and discussion of consumer types and forces that keep them from implementing plans is somewhat intuitive. Financial planners who have been in the practice for any length of time have likely experienced many of those behaviours, and may have altered their own approaches. They may not call them “naive intenders” but they almost certainly have encountered customers who are persuaded to plan but “simply need help in making things happen.” Planners may already have found approaches to turn those intentions into action.

Less intuitive will be the report’s components on the different approaches the planners need to adopt to improve results. The report poses a number of rhetorical questions. On choice architecture: “How do I embed positive choice architecture in the ongoing communication? Specifically, how can I frame my messages to elicit action?” On packaging the plan: “Should the plan be a consolidated detailed plan versus a collection of short-term brief plans?” On timing: “When is the right time to remind the client?”

The report doesn’t provide answers to those questions, which leaves it for the planner to develop. It also directs firms to consider working with behavioural experts. “We also encourage interested organizations to ‘start small’ in their interventions, relentlessly test, learn and adapt their ideas and build out experimentation capabilities over time.”

That will certainly test an industry where growth often comes from more immediate measures such as new products to sell, and new services to provide.

The report that focuses on implementation gaps and behavioural approaches of consumers may be challenged by the implementation gap it leaves for planners.