With the ethics and conduct of the Australian financial planning sector actively under review, many consumers are now questioning the integrity of financial institutions in general. Financial regulators are also now searching for more rigorous frameworks to define ethical practice. There is emerging evidence that behavioural economics can help define a balanced view of what constitutes ethical practice in the development and marketing of financial products, grounded in a more informed understanding of the consumer brain.
The field of behavioural economics has been around since the early 1980s but has increased in profile since the global financial crisis, when many financial institutions came under the spotlight for employing questionable sales tactics; the high prevalence of consumers making misguided financial decisions (leading to dire individual and systemic outcomes) became a burning discussion topic around the world.
At around the same time, neuroscientists were discovering more about the important role that cognitive bias plays in our decision-making.
Our Bevaioural Economics Process helps organisations examine their own products and marketing practices in order to satisfy both their own governance and the regulator’s spotlight. Without a clear understanding of the cognitive bias involved in its consumers’ purchases, organisations will struggle to develop strategies that anticipate future regulatory measures. A significant risk in this situation is the brand damage associated with unexpected investigations that suggest organisational ethics, discipline and consumer commitment.
- Prioritise - what are our priority products?
- Investigate - where does our current data plot the product in terms of ethical practice?
- Validate - what additional evidence do we need to accurately plot the product in terms of ethical practice?
- Strategy - what do we need to do to remedy ‘problem products’ ?
- Embed - how can we embed ethical marketing maturity in everything we do?