THE EFFECTS OF NUDGES IN ACQUIRING NEW CLIENTS IN A WEALTH MANAGEMENT FIRM

Financial Advisors typically have strong backgrounds in finance, investments, and financial planning, but not marketing. Financial Advisors often need help in acquiring new clients and investment assets. To meet this need, businesses have evolved in lead generation and digital marketing, but they fail because they do not relate to the psychological needs of the investor. It is estimated that only 29% (Dickler, 2019; Godbout, 2021) of all investors have a Financial Advisor. This study researches two issues: the psychological impediments to an investor not seeking a Financial Advisor and Behavioral Economic tools such as Nudge to measure the impact of raising the marketing response rates of the investor. A Nudge is a psychological prompt to persuade someone to do something that is good for themselves. It was developed by Richard Thaler, PhD who won the 2017 Nobel Prize award in Economics. The motivation of the study is to better understand why approximately 70% of investors do not have a financial advisor. The study also examines what Behavioral Nudges will best work to prompt investors to seek a financial advisor. The theoretical contributions include why investors do not seek a Financial Advisor and how effective Behavioral Nudges are in improving marketing response rates. The study also tests the effectiveness of Behavioral Nudges to acquire investors in a wealth management firm. The study reveals that while investors with certain overconfidence tendencies (e.g., Overprecision) seeks financial advisors, those with certain other types of overconfidence (e.g., Overplacement) do not seek such services. The practical implications of applying Nudges to acquire investment clients are significant. Even a low response rate of 2.50% could increase the number of investor clients that work with Financial Advisors by 4.67 million. This would benefit both the advisors seeking to increase their practices and investors who need help in making better financial decisions.