How Can Banks Benefit from Behavioral Science? JPMorgan Chase’s Jeff Kreisler Explains

It's hard to draw a straight line from behavioral science to banking profitability, so why are JPMorgan Chase and U.S. Bank investing in it? Here's a look at initiatives underway to use insights from behavioral science to create better customer experiences and build trust.

When Jeff Kreisler meets with JPMorgan Chase’s wealth management clients, he tells them he’s neither a consultant nor a therapist.

Still, he often gets asked the kind of questions that a consultant or therapist would.

That’s because decisions related to money are not entirely financial, they are tied to life choices, says Kreisler, whose title is head of behavioral science.

Banking leaders who understand this can better help people reach their financial goals, he argues.

Nonetheless, few U.S. banks have a position like his.

The Perspective That Behavioral Science Provides

Kreisler, a managing director in his company’s J.P. Morgan Private Bank, says he often meets clients who are near retirement but who are reluctant to sell their businesses. A sale aligns with their investment strategy and offers them opportunities to pursue other life goals. Yet, they don’t want to sell.

He understands that reluctance — it has a lot to do with the psychological need to feel connected, competent and in control. But he doesn’t get into concepts like self-determination theory with clients or try to offer explanations about why they might be feeling a certain way.

Instead, “I work to understand what the client wants and their perspective to help them reach a decision that fits their goals,” Kreisler says.

Common Biases in Decision Making

Bias Effects
Loss aversion Losses feel more meaningful than gains.
Expedience bias A rush to judgment without much evaluation.
Bandwagon effect The tendency to do or believe things because others do.
Optimism bias A belief that the future will be better than the present.

Behavioral science, which draws insights from psychology, sociology, and economics, among other disciplines, aims to explain human decision making, which is prone to many well-understood biases.

Behavioral science doesn’t give you off-the-shelf solutions,” Kreisler says. “It helps me and our advisors — who are so smart and so experienced — focus the breadth and depth of our knowledge on what the client needs.”

The Business Case for Behavioral Science in Banking

It’s hard to draw a straight line from conversations about goals and motivations to profitability, which may explain why there so few chief behavioral scientists in banking. But Kreisler, who joined J.P. Morgan in December 2020, contends that there’s a strong business case to be made for the use of behavioral science. “The fact that J.P. Morgan hired me shows that it is not a fad,” he says.

Research suggests the banking industry should invest more in better understanding consumers’ motivations. The J.D. Power U.S. Retail Banking Advice Satisfaction Study showed a drop in the quality and frequency of, and satisfaction with, financial guidance provided by banks in 2022 compared with 2021. J.D. Power characterized the 30-point decline — to 601, on its 1,000-point scale — as significant.

Understanding the 'Why?':

Behavioral science uses insights from many academic disciplines to explain the motivations behind decision-making.

Customers who felt that they received good advice tend to have more products and are less likely to switch banks. When customers reported that they received two or more instances of advice, their overall satisfaction with their bank increased by 52 points.

Most of what a bank offers can be found at the bank down the street. “But when you’re connected to clients as people, they’re going to trust you. And that is going to benefit the business,” Kreisler says.

Those advisory relationships offer significant value in the short term and, with wealth management in particular, they can have a multigenerational impact, he adds. “If you’re the person the client is connected to, the family doesn’t leave to go to some other bank when the client passes away.”

Read More:

Kreisler’s Unusual Path to a Banking Career

Kreisler’s ability to communicate scientific insights and make them actionable brought him to banking, albeit circuitously. He earned his undergraduate degree in economics from Princeton University, a law degree from the University of Virginia, and then took a detour — into standup comedy.

“I’ve often thought lawyers and comedians and behavioral scientists have a lot of similarities,” Kreisler says. “They look at a situation, examine it scientifically, and break it down into its elements. Then they tell the story: Comedians tell it to get a laugh; lawyers tell it to get their clients’ perspective, and behavioral scientists tell it to speak the truth.”

Jeff Kreisler I think that's why this company has been so successful: Because we provide things that no one else can.

The next detour came when Dan Ariely, a professor of psychology and behavioral economics at Duke University and founder of the Center for Advanced Hindsight, asked Kreisler to collaborate on a book. They coauthored “Dollars and Sense: How We Misthink Money and How to Spend Smarter,” a partnership that piqued Kreisler’s interest in banking.

For the next few years, he led a website that focused on behavioral science topics. He also consulted with senior banking executives about how the lessons from the book might be applied to investments and other issues. “I was starting to think how I could actually go do the work, not just talk about people doing the work,” Kreisler says.

He got the opportunity to make that transition in 2020, when J.P. Morgan brought Kreisler on in his current role.

Prefer a podcast? Hear more about behavioral science from Nancy Harhut.

What Does The Head Of Behavioral Science Do?

Roles like his — the more commonly used title across business in general is chief behavioral officer — tend to operate within a particular department, often marketing, human resources, customer experience, or product development. But a few large banks, including U.S. Bank, BBVA, and Commonwealth Bank of Australia, employ behavioral scientists who contribute across the whole organization.

U.S. Bank hired Julie O’Brien as head of behavioral science and coaching in July 2021. She leads a team of scientists working to improve the customer experience companywide, according to a blog post about the hire.

She is also charged with finding ways for U.S. Bank to do a better job helping customers achieve their personal, career and financial goals, both in person and through digital challenges, the company wrote.

“I work to understand what the client wants, what their perspective is, and talk to them about what they want to know, and not about what I have to say.”
— Jeff Kreisler

O’Brien joined the bank from Weight Watchers — and says in the blog post that shifting her focus from weight loss to financial success is not as much of a change as it might seem.

The basic challenge is the same: “How do we help people avoid temptations every single day for the rest of their lives? Many things we want in the abstract, like saving money or being healthy, are hard or don’t feel good right now, and many things that feel good right now are not good for us in the long run,” O’Brien says.

Similarly, while Kreisler works directly with J.P. Morgan Private Bank’s high-net-worth clients and their advisors, he also lends his expertise across the entire company, consulting on leadership development, onboarding programs, data experiments and more.

Current projects include drafting a behavioral science curriculum for J.P. Morgan employees and writing internal and external-facing thought leadership pieces to help employees communicate and connect with clients.

“This work is about communication and explaining how behavioral science works to different stakeholders, from those new to finance to the most seasoned bank CEOs, and finding ways to provide actionable insights,” he says. “It’s about building relationships and having people we work with feel good, feel engaged.”

Read More: Consumers Expect Advice, But Banks Are Falling Short

Applying Behavioral Science In Any Banking Role

With $3.7 trillion in assets, JPMorgan Chase is the largest retail banking company in America. So it has the resources to press its advantage. “I think that’s why this company has been so successful: Because we provide things that no one else can,” Kreisler says. “We have a breadth and depth of expertise that is rare, if not unequaled. Adding behavioral science can only enhance that.”

Still, Kreisler believes financial institutions of all sizes can benefit from using behavioral science. He says bankers in any role can apply the insights it offers: Human resources can use behavioral science in employee engagement programs; legal can deploy tactics to increase compliance, and marketing can incorporate its principles into customer acquisition strategies.

“Being able to understand another person’s perspective is key to communication and working together,” Kreisler says. “This stuff matters. And it deepens relationships with clients, which matters when every bank down the street can do 90 percent of what you do.”

This article was originally published on . All content © 2024 by The Financial Brand and may not be reproduced by any means without permission.