Applying Behavioral Science to Improve Retention Among Financial Coaching Programs

Whether it’s our morning routines or how we relax, a lot of how we behave from one day to the next is out of habit and we don’t give it a lot of thought. When we are thinking about how we want to behave in the future, though, we are doing so consciously. We set our long-term goals with some degree of intentionality. We may think about what we want to achieve and why this would be beneficial for us. This process of forming the “what” and the “why” – or, our intentions – is seen as an important first step towards achieving our long-term goals.

The problem is, though, regardless of how strong our intentions are, setting goals and forming intentions does not always translate into behavior. In fact, research has consistently found an “intention-action gap.” We don’t always follow through or behave in the way we wanted to, often falling short of our goals in consequence.

We see this all the time with regards to our finances. We may want to put a little a side in case of emergency or pay more towards our debt, but for a number of reasons we fall into the “intention-action gap.” Even worse, the gap may feel especially wide if we are poor or if we have uncertain, volatile incomes that make it difficult to consistently match our expenses with our income.

Financial coaching represents a promising way to overcome the intention-action gap and help those struggling financially to find greater stability. Several recent evaluations have found that those who participate in financial coaching are more likely to engage in positive financial behaviors and they experience significant improvements to their financial circumstances in terms of employment and changes in their credit score.

The process of setting, working towards, and, ultimately, achieving personal goals is at the heart of financial coaching. While coaches offer expertise and support along the way, participants have the responsibility to set and achieve their own goals. In this way, participants’ self-determination is central to coaching and likely plays a role in driving its success: participants develop greater intrinsic motivation when they set goals themselves. However, this also means that participants must commit the time and effort in order to get the full benefits from coaching. Many do not make this commitment.

Financial coaches, then, face an important tension: they must push participants to set their own goals and help them develop intrinsic motivation while recognizing that they must first engage participants before they can really build this kind of motivation. Caught in this tension are questions around retention – what are the factors that make participants more likely to engage and commit to financial coaching early in the process? How should coaches build the relationship with participants? Are there different ways of engaging participants that might increase how many continue with the financial coaching program?

Over the past 18 months, LISC and the Common Cents Lab at the Center for Advanced Hindsight have partnered to explore just this question. Using insights from an in-depth behavioral diagnosis, we designed several potential interventions that addressed barriers faced by many coaching participants. We tested two of these interventions in 24 different Financial Opportunity Centers across 10 different cities:

1. A visual goal-setting exercise, where participants selected one of eight photographs that captured what they wanted in their financial future.
2. A postcard that participants wrote to themselves in the future to remind themselves what they wanted in their financial future.

After a rigorous evaluation of our interventions, we found encouraging results. Even after controlling for individual characteristics and accounting for variations between the sites, the visual goal setting exercise significantly increased average retention. We also see that the visual goal setting exercise motivated participants to attend more sessions, both in total and within 3 months of enrolling in the program.

We also found that, although it did not further increase retention, the postcard to future-self did have a significant, additive effect. Writing the postcard to future-self likely further increased the number of sessions that the participants attended and decreased the average number of days between those sessions.

Taken together, our analysis suggests that both interventions increased participants willingness to engage with financial coaching.

There are a number of reasons why we think these interventions worked. The visual goal setting exercise leveraged the emotional power of photographs to help participants better connect with their long-term goals. This intervention digs deeper into how we interact with visuals and photographs – when we “see” a photograph, we do not just see static images. Instead, we intuitively connect them as part of a broader context or story. These stories make it far easier for us to connect emotionally with images and photographs. This emotional connection is important because it helps participants to build intrinsic motivation as they work towards their goal.

On the other hand, the postcard was intended to work both as a reminder (coaches actually sent it to clients if they missed a session) and as a short-term commitment device. However, coaches did not send very many postcards, even when they missed a session. Yet it did not seem to matter. The postcard forced participants to focus their attention and to take a moment to summarize their feelings about the card they selected. This reflection and summary of why they picked the photograph they did seemed to make it feel more meaningful.

More generally, these interventions suggest we should re-think what it means when someone drops out of a program. It’s easy for us to think that, “this just isn’t the right time for them” or that “they will come back when they are ready.” This places the responsibility with the participant when in fact the problem may be that we are not engaging them in the most effective manner.

Indeed, this research suggests that someone’s willingness to engage with financial coaching is not simply a function of a participant’s financial circumstance and their individual motivation. Their willingness to continue to work with their coach is shaped by a larger set of influencing factors than we tend to believe. The interventions described here represents one successful effort to re-design a goal setting activity to be more motivating. There are others, and moving forward, we should continue look for different ways to interact and communicate with participants about their goals so that they are more likely to make it across the intention-action gap.

If you would like to read more about this research, please check out our report here:
Applying Behavioral Science to Increase Retention in Financial Coaching Programs

Emory Nelms ALUMNUS