What is Neurofinance and Why Should You Care?

Neurofinance findings

Neurofinance findings shed light on how we make decisions. It brings objective analysis into a process previously thought to be entirely subjective.

Here are two findings you may find interesting.

Selective information processing

One study analyzed the eye-tracking movements of participants reviewing prospectuses.

It found a pronounced tendency of participants to base their judgment of the attractiveness of a financial product on the information presented in the top left-hand corner of the prospectus, causing them to neglect other important information and make poor decisions.

Here’s how you can use this finding:

• Presentation design: Redesign marketing and presentation materials to present the most critical information, like fees, risks, and performance history, prominently in the top-left corner.

• Use visual hierarchy: Employ design principles that create a clear visual hierarchy, ensuring that vital information is not buried within the document. Highlight key details, such as expense ratios and historical returns, in a visually appealing manner.

• Simplify language: Ensure that the language used in the top-left section is clear and concise. Avoid jargon or complex financial terms.

• Provide visual aids: Consider using charts, graphs, and infographics. Visual aids can make complex information more digestible and engaging.

Focus on “gist memory”

Another study highlighted the biological changes that challenge the decision-making processes of older adults, like age-related declines in the structural volume and functioning of the prefrontal cortex, altered emotion/reward processing, and altered connectivity involving the default mode network.

Older adults compensate for these losses by conserving “gist memory.”

Gist memory refers to remembering the general meaning or essence of information rather than the specific details. It is the ability to extract the most essential information from a complex set of information and remember it in a simplified form.

Once you understand that older adults may not be able to understand specific details of the information, here are some practical tips for how you can adjust the way you present information to them:

• Simplify and summarize: To appeal to gist memory, simplify complex information and present it in a summarized form. Use clear and concise language to convey the core message. Avoid overwhelming your client with excessive details.

• Visual aids: Use charts, graphs, and images to enhance gist memory. Visual information is processed more effectively and retained longer than text alone.

• Narratives and stories: Craft narratives around your information to help it stick in people's minds. Stories provide context and meaning, making it easier for the gist to be retained.

• Repetition and recap: Repetition reinforces gist memory. Reiterate critical points throughout your presentation or document. Summarize the main takeaways at the beginning and end.

• Highlight key information: Use bolding, italics, or color-coding formatting to emphasize essential information.

• Analogies and metaphors: Comparing complex concepts to familiar analogies or metaphors can facilitate gist memory. Analogies make abstract information more concrete and memorable.

• Engage emotions: Information linked to emotional experiences tends to be remembered better. Incorporate emotionally resonant elements, but do so ethically and responsibly.

• Chunking: Organize information into smaller, manageable chunks. This simplifies the cognitive load and allows for better gist extraction.

• Interactive learning: Active participation enhances gist memory by involving multiple senses and cognitive processes.

• Use mnemonics: Create mnemonic devices or acronyms to help people remember key points. Mnemonics provide a structured way to retain essential information.

• Practice spaced repetition: If you deliver information over time (e.g., in a series of presentations), use spaced repetition. This technique involves revisiting and reinforcing critical concepts at intervals, optimizing long-term memory retention.

Neurofinance resources

To explore neurofinance in more detail, here are some resources:

https://www.frontiersin.org/research-topics/7424/neurofinance

https://journals.sagepub.com/doi/full/10.1177/1094428117730891

https://www.cairn.info/revue-finance-2018-2-page-9.htm?ref=doi

https://neuroprofiler.com/en/neurofinance-decision-making/

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8634447/

Dan coaches evidence-based financial advisors on how to convert more prospects into clients. His digital marketing firm is a leading provider of SEO, website design, branding, content marketing, and video production services to financial advisors worldwide.

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