Executive Summary
Financial planning can often involve some pretty long meetings, simply given the complexity of both the lives of our clients, and the solutions from which they must choose. Unfortunately, though, recent research shows that when we have to stay mentally focused for an extended period of time, it can actually lead directly to less effective decision making. Consequently, asking clients to make important decisions at the end of a long financial planning meeting - even one filled with great information and education - may actually be the worst way to lead the client to a well-thought-out decision, due to mental fatigue! Fortunately, though, there are solutions. Some planners may choose to adjust how meetings are structured, making the meetings shorter and/or presenting decision-making opportunities to clients earlier (before they are so mentally fatigued). Alternatively, it turns out that a remarkably effective solution is to actually refuel the brain, with some carbohydrates/sugars that bring the brain the glucose it needs to refresh itself. But in the end - whether it's a shorter meeting, a cookie, or some fruit juice - it's probably time for planners to pay more attention to the client's state of mind before moving to the decision-making phase of a financial planning meeting!
The inspiration for today's blog post is some recent research I read about in Daniel Kahneman's "Thinking, Fast and Slow" about how our brains make decisions, and in particular about the concept of ego depletion researched by Roy Baumeister and his colleagues. The basic concept of their research is relatively straightforward - it turns out that our self-control and ability to make thoughtful decisions is actually an exhaustible resource that can run out.
Research on Ego Depletion
The early research on this subject focused on our ability to exert out willpower to resist temptations. For instance, it turns out that if you are in the midst of conducting a mentally strenuous task and are presented with a choice to eat chocolate cake or fruit salad, you are more likely to be tempted by the chocolate cake. More generally, the research has found that if we exert too much focused effort and/or do so for too long, at the end we are prone to succumbing to temptations, making hasty decisions, and failing to think through problems effectively.
A more disturbing version of ego depletion comes from a study in recent years in the Proceedings of the National Academy of Sciences. As Kahneman highlights in his book:
The unwitting participants in the study were eight parole judges in Israel. They spend entire days reviewing applications for parole. The cases are presented in random order, and the judges spend little time on each one, an average of 6 minutes. (The default decision is denial of parole; only 35% of requests are approved. The exact time of each decision is recorded, and the times of the judges' three food breaks - morning break, lunch, and afternoon break - during the day are recorded as well.) The authors of the study plotted the proportion of approved requests against the time since the last food break. The proportion spikes after each meal, when about 65% of requests are granted. During the two hours or so until the judges' next feeding, the approval rate drops steadily, to about zero just before the meal. As you might expected, this is an unwelcome result and the authors carefully checked many alternative explanations. The best possible account of the data provides bad news: tired and hungry judges tend to fall back on the easiest default position of denying requests for parole. Both fatigue and hunger probably play a role.
Simply put - the longer we go working on mentally demanding tasks (such as reviewing the details of parole applications, one after another after another), the more likely we are to make the hastiest, "easiest" decision - such as whatever the default happens to be - rather than really take the effort to come to a well thought out conclusion.
Ego Depletion in Financial Planning
The ego depletion research - especially the study on parole judges - resonated with me because I find that in financial planning, we have a similar ego-depletion environment: the financial planning meeting. In particular, the plan presentation meeting, where clients are asked to maintain focus while a large volume of technical information is presented to them... at the end of which, they're often asked to make major financial decisions, such as how much risk to take in a portfolio, how much to plan to save and spend, whether or not to purchase certain insurance, etc.
If we are to believe what we see in the ego depletion research, a 1.5 to 2 hour financial plan presentation meeting, where clients are expected to put forth continuous mental effort to keep up with the information being presented (which is likely to be complex and difficult to the client), is almost certainly a mentally draining process. Astute planners often notice that by the 90-minute mark (or sooner sometimes!), many clients begin to look unfocused as their eyes glaze over and they simply run out of the mental energy and fuel necessary to keep up with the information being presented.
Which means that clients asked to make decisions at the end of the meeting, after being mentally drained, are very likely to select whatever the 'easiest' choices are. If the default is to do nothing, the odds are that the client will do nothing. If there's an option that reduces stress or ends the meeting faster, the client is likely to pick that one. Choices that require significant effort or consideration are likely to be deferred if at all possible; if the decision cannot be deferred, mental fatigue alone suggests that "no" or "no change from the status quo" will be the most likely response.
Dealing With Ego Depletion
Fortunately, the research indicates that there are ways to deal with ego depletion.
The first is to attempt to address the underlying biological issue. To the extent that ego depletion essentially means the brain has run out of fuel due to focused effort, it turns out that one of the simplest ways to combat ego depletion is to refuel. For instance, Baumeister and his colleagues have shown in several experiments that ingesting glucose - i.e., sugar - is actually effective in undoing the impact of ego depletion. In fact, in one experiment it was shown that lemonade sweetened with sugar was effective to reduce the effects of ego depletion, while those who consumed lemonade sweetened with Splenda - artificial sugar the body does not consume - continued to make ego-depleted intuitive errors on the experimental task.
Accordingly, this suggests that one of the best ways to keep clients focused through a long financial planning meeting is actually to take a break to refuel. A small snack of carbohydrates, from fruit to juice or even soda (not diet, but soda that actually has real sugar) or cookies/candy, can give the brain the glucose fuel it needs to restore focus and make effective decisions. Consider encouraging clients to take a small refueling break - and make such light snacks/drinks available to them - before transitioning to the decision-making part of the meeting. (Notably, though, just offering water isn't enough, as there's no sugar/glucose to actually refuel the brain!)
The second way to address ego depletion is to consider adjusting the duration or approach of the meeting itself. The goal would be to either make the meetings shorter - so that clients are not as fatigued and mentally depleted by the end - or to structure it so that decisions can be made along the way, instead of lumped entirely at the end when the client's brain is least capable of actually making a well-considered decision.
Some planners might even consider a combination of the two, both adjusting meetings so that decisions can be made incrementally throughout the meeting before the client is mentally fatigued, and taking regular breaks - including eating (or drinking) a snack - to help make sure that clients have refueled their brains. As the research shows, it really does matter. And of course, the reality is that financial planners are human beings sitting in the meeting as well, who also get mentally fatigued; so that late-meeting snack might actually be a good idea for everyone involved!
So what do you think? Do you find your clients (or yourself?) mentally fatigued by the end of a meeting? Have you made any changes to how you present financial plans to help combat mental fatigue? Do you ever offer clients a drink or snack to help them refuel? Are you considering doing so now?
