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How 95% of Decisions Are Made

People make major decisions based on emotion.

According to Harvard professor Gerald Zaltman, 95% of purchasing decisions are subconscious. Translation: affluent consumers aren’t as savvy as they’d like to think. Zaltman’s research highlights the fact that…

People make major decisions based on emotion (subconscious feelings) and then attempt to support their decisions with logic (conscious thinking).

This might be one of the reasons affluent clients don’t credit their financial advisor when their portfolio is up in a bull market. The marketing attributes of a particular product, including features and benefits, prompt bored reactions and garner poor results overall when they are the primary topic in a conversation, presentation or marketing campaign. Why? Because too many are often feature-dominant and fail to engage the subconscious, the emotional element of decision making.

Luxury products are the poster children for emotional decision making. The status and prestige associated with owning a high-end Mercedes is universal throughout the world. However a high-end Hyundai, for half the price, would be the logical (conscious thinking) choice. It’s just as comfortable, less expensive to maintain, and has equal passenger and trunk space – and the money saved can be an investment with their financial advisor. Both vehicles' marketing targets an emotional feeling the consumer will enjoy from owning their vehicle – but I’ve yet to see Hyundai target the emotional response associated with the savings over a Mercedes. Granted, Mercedes has the distinct advantage of being a status symbol, while Hyundai is a practical alternative that could still trigger an emotional response.

It’s easy to understand Zaltman’s findings when it comes to tangible luxury products; some brands are associated with status, others are not. Regardless, the old advertising adage, “Sell the sizzle, not the steak” is a truism for marketing strategy and decision making. Although this is a bit more nuanced in the intangible world of financial services, it still holds true.

For instance, let’s look at three findings from our affluent research, they want...

  • Investment performance to meet their expectations
  • A financial plan that is kept current
  • To maintain their current lifestyle throughout their retirement (the rest of their lives)

Investment returns and a current financial plan are fact-based findings – they are objective and measurable. However, meeting or exceeding expectations in either does not elicit an emotional response in an affluent client or prospect. When investment returns meet expectations it’s expected, when they exceed expectations that’s good. It’s when they don’t meet expectations that a negative emotional response is triggered; fear, anger, etc.

Developing a thorough financial plan and keeping it current is also what is expected. Lack of a financial plan, when reminded by a financial advisor who’s prospecting, triggers this negative emotional response. Good for the advisor who’s prospecting, bad for the advisor who hasn’t provided a financial plan.

Whether it’s with a prospect, client, or referral alliance partner, the goal should always be to achieve the strongest positive emotional response possible. Which takes us to the third of our bulleted facts above; maintaining their current lifestyle. In this example, that’s the sizzle. Whether the market is up or down, in the midst of every financial plan review – this should be the mantra. This triggers the subconscious mind, the emotional component of decision making.

Obviously the narrative needs to be adjusted depending on who you’re having a conversation with. Individual prospects have unique wealth management strategies and ideas of what maintaining their lifestyle in retirement will look like – approaching the topic with them should reflect as such. Keep in mind that eliciting comparable emotions is key here. This could mean discussing anything from travel destinations and vacation homes to children and grandchildren.

A client should be emotionally reminded – always. While a referral alliance partner will need to understand more about how you do what you say you do, it's important to remember that their subconscious still plays a major role in their decision to continue to refer affluent clients to you.

This is why you should always choose your words carefully, use relatable stories to make a point, and be careful not to overload with facts.

Whenever you engage in a business conversation, remind yourself to “emotionally engage,” as the subconscious is the key player in the decision-making process. And don’t be surprised as you find yourself impacting more and more favorable decisions.


Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients.

TAGS: Prospecting
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