It is America in the 1970s. The US economic picture is dominated by inflation,unemployment,high oil prices and recession. Meanwhile, a small group of economists and social scientists start to question the idea that humans always make rational and predictable decisions when it comes to money.
At the time, this seems like a crazy challenge to established economic thinking. All theories assume humans are not affected by their emotions when making financial choices. But this handful of academics keep working away at this new idea. They become increasingly convinced these traditional theories do not tell the full story.
If we want to really understand how people make financial decisions, they say, we also need to consider more carefully how emotional and irrational humans can be.
These guys became the founding fathers of behavioural economics and behavioural finance.
Unsurprisingly, the revolutionary idea did not take off immediately. But the community soon started to grow, with behavioural thinking working its way into many other sectors, like politics, business and retail.
When one of the founding academics Richard Thaler won the Nobel Prize for Economics in 2017, it confirmed its acceptance as one of the most important and defining ideas of our era. The behavioural finance community continues to expand and develop today. I see it in my own experience. It started as a niche but there are now more and more of us every time I look.
Advisers are on the front line, dealing with humans every day, so it is no surprise they should be the early adopters, although now even some of the big asset managers are cottoning on to the insights of behavioural thinking and employing them at a more corporate level.
But while the bigger corporates are certainly catching on, it is at the adviser level that the real revolution is taking place. The role of advisers in the development of the behavioural finance discipline is crucial because we are the ones single-handedly changing the way people think and act around their money. It is a job many of us relish, but that does not mean it is easy. It can also be lonely.
There are plenty of behavioural advisers out there but we tend to live something of an atomised existence.
We need to remember to keep plugged into our community. Learning from each other and sharing experiences is not just good for the advancement of behavioural thinking; it is beneficial to us as its advocates and practitioners too.
A community for everyone
As we draw strength from this community, we continue to help it grow. It is our job to bring more people into the behavioural finance fold.
It is down to us to coach and educate our clients on the benefits of the approach, not only so they can become financially successful themselves, but so they can spread the word about its power and value to their own family and friends.
When good advice means something to people and they can see it making a difference to their lives, they then become advocates.
And when new clients are more receptive to these ideas, our job becomes easier and so it continues to grow.
The behavioural finance community is not just for in-the-know advisers; it is a community that includes the people who receive the advice too. This is what makes it so special and powerful. In fact, in this community, our clients are the most important members of all.
When you work so closely with them over many years through the significant phases and transitions of their lives, you can get to know each other very well. It is unsurprising that employing such a human approach to helping clients does not just bring them into the community but often turns them into friends as well.
From an idea born in 1970s, recession-hit America, behavioural finance has created a community that makes our profession proud.
Andy Hart is founder of Humans Under Management
You can follow him on Twitter @MavenAdviser