Behavioral Finance

BD vs QA

Could Big Data Replace Risk Tolerance Questionnaires?

The holy grail of behavioral insight is aligning and blending demographic and financial related big data (the external view of the client) and psychometrically measured personality traits (the internal view of the client), and then deploying tools to utilize the blended information to guide the planning process. Our view is that by using Big Data a firm can get a quick leg up in knowing the client to start the prospecting phase. However, from a behavioral perspective, the whole planning process should not be exclusively built on Big Data.

The advisor/firm will never know the complete picture until they have the client complete a psychometrically designed assessment, which if structured correctly, will provide strong insights into client emotions and decision-making under pressure. Two clients can have similar Big Data attributes but very different personalities. On the surface, their activities may mimic one another, but in reality, they’ll need to be communicated with differently and offered solutions from a different perspective to address differing risk profiles and suitability requirements.

A key point in approaching the application of Big Data to Risk is to recognize there are ranges of distinct and separately measured elements which make up a person’s risk profile. There are 3 primary elements, with sub-elements.

  1. The Risk Need – the risk required to achieve goals; This is really the domain of financial planning software, calculators etc not Big Data or RTQs/DNA
  2. The Financial Capacity – the financial ability to endure the risks of portfolio losses; If enough of the right Big Data attributes are accurately gathered then the Financial Capacity can be calculated that way to a reasonable level. However, there can be flaws because people use entities, separate accounts and many other factors that may hide their financial position. But, nevertheless, there is good external data to build the financial capacity story.
  3. The Risk Tolerance (and Risk Propensity, Loss Aversion) – the emotional ability to take risks and live with losses. This is personality driven. The Big Data can predict this to around a 30% level if the right Big Data attributes are used, although this can be increased to up to 60% if there is some database optimization using behavioral insights. However, adding a correctly structured RTQ to the mix will lift the accuracy to 80%+, and Financial DNA will lift accuracy to 91%+

Overall, we do not think that RTQs should be eliminated as they reflect the internal view of the investor’s risk tolerance. Although, as we know, there is a wide gap in the quality of RTQs. And the less robust ones may not move the needle much in improving the quality of behavioral insights. Whereas, the Big Data (if accurate) will reflect the external view and particularly their financial capacity. So, the RTQ and Big Data are designed to measure different risk profile elements. If both are used in tandem it would be a lot more helpful than if only one or the other were done.

Also, from our perspective, there is more at stake than just the risk profile in using Big Data with personality insights, there is advisor-client communication, financial management behaviors, identifying rogue advisors due to financial pressure, and many more elements. These are all areas in which we’ve developed algorithms for and more.

First Family blog 1

The First Family in Business: Is the Nation in Safe Hands? (pt 2)

In Part 1 of this series, we established that as a couple the President and the First Lady have undoubtedly understood how to modify their natural behavior and communication style to lead the family, work together and carry the heavy responsibility of the Presidency for the next 4 or more years.

But what of the wider family, some of whom will be actively involved in working with the President and First Lady and continuing to run the Trump Empire? What of their aspirations? How has becoming a member of the First Family of the United States altered their approach to family, life, and business?

In Part 2 we will consider the family dynamics in relation to their building a sound working relationship together. This family is unique in that it needs to have a very stable EQ. Much of what they do is not only covered by legislation, in other words, it’s Dad who is the president, not them! They are separated in terms of state and their family business. How they relate and interact with one another, remembering that every family has its own unique dynamics, will be dependent on each knowing how to manage their emotional intelligence.

This First Family will be no different to many others; they will share bonds, have a history and like most families will have tensions, disconnects, but always follow the same old adage blood is thicker than water. Like any group of people the core dynamics, that is, values, biases, culture, education, experiences, will all be part of the family dynamic.

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Using their two strongest behavioral factors the following provides short insights into the individuals that form the Trump Family:

President Donald Trump (Influencer) He is spontaneous and moves/thinks at a fast pace. The President has a unique blend of confidence, initiative, and people skills. He will typically be able to see the larger vision and then use his superior communication skills to influence others towards accomplishing it. He will wholeheartedly invest time and effort into developing others and their personal performance towards goals, particularly strategies that he sees significant potential in.

First Lady Melania Trump (Facilitator) She is reserved and patient, much needed natural behaviors to be able to oversee the dynamics of this family and bring calmness to it. She will combine the ability to guide the family with feelings yet with the determination to reach goals and accomplish tasks. Melania’s blend of behavioral strengths makes her well suited for situations where setting the agenda and recognizing the needs of other people are required. Further, consistency, reliability, and persistence are important. She will flourish in an environment where there is plenty of stability, group decision-making is needed, and where she is recognized for the contribution, she will undoubtedly make.

Ivanka Trump (Reflective Thinker), is structured and plans well, she is analytical, thorough, and philosophical in her search for meaning, truth, and purpose in all she does. Ivanka is particularly adept at drawing incisive conclusions from data and research. Her accuracy and precision are valuable in any group setting, and she will bring objectivity to decision-making processes. Typically, she will prefer to follow guidelines in completing tasks and will expect co-operation to be given.

Donald Trump Jr (Influencer), like his father, he is spontaneous however, he takes measured risks. He has a unique blend of confidence, initiative, and people skills. Furthermore, his father will first see the larger vision, and then use his superior communication skills to influence others towards accomplishing it. Donald Jr. will instead wholeheartedly invest time and effort into developing others and their personal performance towards goals, particularly strategies that he sees significant potential in.

Eric Trump (Adapter), is somewhat unique in that she, like all adapters, has the unusual ability to be able to adapt to the needs of their environment, and displaying whatever behaviors are necessary for success. Eric is very versatile and will generally partner and team well with others. He can generally perform well many tasks relating to achieving his goals and managing his performance and operate most effectively when he has very clearly defined expectations and boundaries.

Tiffany Ariana Trump (Engager) She will enjoy meeting new people, new situations, and new environments and will be a promoter. Tiffany will use her people skills to build relationships and interact with an ever-widening circle of contacts. She enjoys using their verbal skills and will be very outgoing. Tiffany will approach situations enthusiastically, especially when she is passionate about the outcomes, and enjoy new opportunities, and starting (rather than finishing) new projects and goals.

A Summary of the Family’s Behavioral Strengths and Struggles. Knowing these will have definitely helped the family to be successful in business, and to manage the huge transition to being the First Family.

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As Family unit regardless of whether they are building the business or representing the Nation, their approach to finances is stable. They don’t squander money or make unwise business decisions that could bring the empire down. This approach is likely to be the approach the President takes as he oversees the US$.

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To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email, or visit DNA Behavior.

First Family blog 1

The Trumps at Home – Miscommunication in America’s First Family? (pt 1)

Not since 1961 has there been such a glamorous, tight-knit celebrity First Family in the Whitehouse as the Trump family. Headed up by President Donald Trump this family is well used to public scrutiny and having the spotlight turned on their every waking move.

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It would foolish to believe that this noisy, fun loving, dynasty wouldn’t have robust dinner table discussions – even more so now that the head of the house is the President of the United States.

But what about the apparently reticent Flotus, that is, Melania Trump? What could be her behavioral and communication style? Well – dumb she is not – she speaks five languages which could certainly be useful at state dinners. Her background is ordinary – raised in Yugoslavia not as part of high society in a Trump-like tower, but in a concrete apartment block tower.

Married to the most influential leader in the free world, Melania Trump would need to be a special kind of woman to manage or influence her President husband and this blended family. Trumps Personality (Influencer DNA Behavioral Style) is well balanced by that of his wife’s personality (Facilitator DNA Behavioral Style). Melania Trump will be the glue to this high-powered, influential family.

The Trump family, through understanding their Natural Behavior and Personality, has obtained insights into how to navigate human differences and communication styles to build a cohesive family existence. They get each other. They understand where and when to modify their behavior in certain situations based on experiences, education, and values.

Work-Life balance is important to this family. President Trump uses a family residence rather than Camp David to relax. He refers to Mar-a-Lago as his Southern White House. A further example of work-life balance is their decision for the First Lady to remain in New York until the end of their young son Barons school year. They clearly believe in the age old adage a family that plays together, stays together.

Summary of the Family Strengths and Struggles:

First Family blog 3

The Trumps are no different to other blended families. They will have heated and robust discussions. This is typical family dynamics and isn’t just because they are the Trumps/First family.

Not everyone in families is around the Thanksgiving table. There will always be black sheep or disenfranchised member – it’s called family. It is not unreasonable to assume there are personality challenges. There will always be blind spots in families. How we see each other depends very much on how we see ourselves. As parents, even in powerful, yet blended families such as the Trumps, we have different perspectives of our children because that is all that we can see or not see. The goal is to get more clarity. Understanding how each member communicates and how they wish to be communicated with can be a significant first step to delivering not just harmony, but where a family also works together, significant business success.

With reliability factor of 91% and having been completed by millions of people – taking the DNA Behavior journey helps families to manage the information gap. Many families fail because they don’t understand how to live harmoniously when there are different personalities and communication styles to be navigated.

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To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email, or visit DNA Behavior.

Changing Corporate Cultural, a Behaviorally Smart Guide

Your Dream Investment

Many people invest heavily in self-help courses, books, and conferences but in what, exactly, are they investing? How many of us have a deep understanding of how we tick based on our natural talents, passions, mission, values and purpose?

It occurs to me that a good starting point before heavily investing in self-help stuff – is to know the core of who you are. Where are the behavioral strengths that need focus, and the struggles which need managing? What is your life vision and how well prepared and gifted are you to deliver it?

From a very early age, I knew who I wanted to be and what I wanted to do. I watched people around me behaving badly towards each other in the workplace and in some cases ridiculing others for the dreams and visions they had for their lives. Determined to correct this dysfunctional behavior set in and my passion for building others up and pointing them in the right direction became my life’s work as a mentor and a people culture trainer.

For years I invested in the self-help market to train myself on how to understand others and be their mentor. How to understand the reasons people communicate inappropriately with each other and to find ways in which, through self-help, I could be the answer to some of the challenges I was seeing around me in the workplace.

My personal tipping point (source: Malcolm Gladwell) came on the day I completed the DNA Behavior Natural Behavior Discovery process. I realized that I was investing in all the wrong areas of my inherent personality. I needed to activate the skills and talents (strengths) I had, and build on those without over doing mending the struggle areas, but without the insight, I gained from completing the DNA Natural Behavior Discovery, I wouldn’t have been able to refocus on my career and achieve the success I now have.

So – what did I discover?


Your dream investment


I discovered I have the following strengths for mentoring and training others:

1. Very creative – not in the arts as most would understand – but in wordsmithing and in providing out of the box thinking to help others solve a problem.
2. Capable of giving frank feedback when people are off track and need clarity in being guided to the right path
3. Quite reserved in nature which helps me listen to others as a priority before giving my feedback. This slowness to express emotions or opinion means I am more suited to one-on-one meetings and training small groups rather than continually facilitating and presenting to large groups.
4. Somewhat of a generalist so that I keep the feedback at a high level rather than bogging people down with the specifics before they are ready.
5. Enjoy working as part of a team rather than being left on my own island. Having others to collaborate with regularly is much better for me than working independently.

These insights put me on a sound footing to understand where I needed support, training, coaching and mentoring to deliver the vision I had for my own life.

Very quickly I realized the foolishness of investing in self-help that is unfocused and serves no useful purpose in using behavioral strengths, building confidence, or keeping anyone on track to deliver their life vision.

Having completed the DNA Behavior Natural Discovery process, I was able to target specific areas of self-development; but more than that it also revealed to me the most effective approach to mentoring and training others.

So the moral of this story – invest in revealing your personality; then identify the gaps that need managing. Not only will this save significant $$$ regarding self-help and education, but it will also ensure the $ you spend produces a good or even great return on investment throughout your life.

You will see results in your life, deliver on your vision, and above all, stay with your Plan A – not even tempted to have a Plan B or even C.

To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email, or visit

dna behavior People-Insights

Behavioralizing Advisors & Financial Planning

“Identifying each person’s financial personality regarding how that drives decision making, will reduce costly complaints.” Leon Morales, DNA Behavior International

[The Institute for Innovation Development interview series invites innovation experts, innovative business leaders and emerging FinTech companies to talk to our readers about their latest innovation activities. The series seeks to learn from innovative business creators, uncover innovation best practices, and apply these insights into a financial services business model.

We recently sat down with Leon Morales, Chief Relationship Officer of DNA Behavior International, a robust technology platform designed for financial advisors which delivers practical and scalable behavioral intelligence solutions to Know, Engage and Grow their relationships with their clients and prospects.]

Hortz: In today’s environment, advisors need to go much deeper in applying the know your customer rule and in client engagement. How does DNA Behavior help advisors do that?

Morales: Per our research, every person inherently has, what we call, a unique Financial DNA code representing their financial personality. A person’s natural born DNA behavioral style shapes their financial personality -including risk taking – by their current environment, life experiences, values, and education. Their natural DNA Behavioral style remains stable over time and will drive how a person consistently responds to different events, thereby always influencing life and financial decision making. We have developed the tools necessary for advisors to help determine and manage their client’s behavioral styles. It’s also important to point out that research shows that 93.6% of the financial planning process is the behavioral management of clients. [Research cited: Meir Statman, University of Santa Clara, California The 93.6% Question of Financial Advisors, Journal of Investing, Spring 2000]. Additionally, our compliance management program helps firms achieve a 99.75% level of suitability between the client’s goals, risk profile and the solutions offered. Currently, advisors are only 40% accurate in identifying their client’s risk profile. Our starting point is with a person’s natural instinctive behavior because that is where they are going to revert to when they are under pressure. Significantly, this approach reduces costly complaints placing advisors and firms in years of litigation.

Hortz: Does your FinTech platform help advisors address the DOLs fiduciary ruling?

Morales: Yes. The DOL definition of being a fiduciary demands that advisors act in the best interests of their clients, and to put their clients’ interests above their own. The Financial DNA Discovery Process is the next generation of behavioral discovery capturing all dimensions of a client’s financial personality by utilizing the most academically sound psychometric systems. We strongly advocate this approach because it provides a more accurate measurement of who the client is and therefore the best starting point for any discussions about important life and financial decisions, and longer term education and development. Further, the Financial DNA reporting system provides insights on how best to communicate, framing relevant information on the client’s terms. These insights increase the client’s chances of understanding the advice or recommendations and can reduce the impact of behavioral biases triggering irrational decision-making by both the client and the advisor.

Hortz: Talk about the power of questions! The 46 questions in your Financial DNA Natural Behavior questionnaire are fine-tuned enough to uncover such deep behavioral insights into your clients! What have you determined as the accuracy of the tool

Morales: The Financial DNA Discovery System was independently validated to have a 91% reliability rating by Professors of Industrial Psychology at Georgia Tech University and among many independent psychometric and business consultants each with 10+ years of related business and financial services industry experience.

Hortz: Can you share with us further about other key research which forms the base of your methodology and allows you to characterize it as the world’s most reliable process to reveal and engage clients?

Morales: Our proprietary Financial DNA Discovery Process has been developed and independently validated since 2001 by a highly qualified team with over 100 years of combined academic and practical behavioral discovery instrument development experience. Furthermore, DNA Behavior International has invested more than 60 years in the design of these systems and its programs. To ensure a reliable prediction of behavior, the Forced Choice Scoring Model is the basis for Financial DNA Natural Behavior Discovery which is the first step in discovering the complete financial personality. It solves for dangerous voids in traditional risk profiling. Our view is that most of the traditional risk profiles use situational based questions, that is, the client could respond to the questions differently depending on any one (or combination of) market or personal events, attitudes, feelings, perceptions or education. Our methodologies go deeper into a more instinctive, automatic, hard-wired Level 1 decision-making behavior. Daniel Kahneman the psychologist known for his extensive work in behavioral finance and decision making, details this “Level 1″ automatic decision-making area in our brains as, when we are under pressure, where our “hard-wired” instincts will drive decision-making. So unless a clients Level 1 behavioral style is known, it is impossible to build a long-term portfolio, as it will be emotionally incompatible. So the questionnaire has to be designed to uncover this Level 1 behavior – free from personal or situational bias. The Financial DNA Discovery provides this Know Your Customer insight, and the validated results are accurate and constant over time. It’s also important to understand that risk tolerance is only one dimension of a client’s financial personality, and in fact, there are multiple elements of an investor’s overall “risk profile.” There are several other behavioral finance factors necessary to fully understand the decision-making biases of both the client and advisor. Not communicating these biases only creates more risk to the client/advisor relationship, decision-making, goal-setting and overall compliance. So, the risk discussion is not complete without knowing the client’s full set of behavioral biases and knowing how to communicate on the client’s terms.

Hortz: Besides having clients fill out the Financial DNA Natural Behavior questionnaire, you suggest that the advisor does so as well. What benefits does that provide the advisor?

Morales: When an advisor is aware of their own bias, they are better able to offer advice that is in the best interests of the investor, in a fiduciary fashion. This client first approach is an increasing concern to financial regulators. With both client and advisor completing and sharing the Natural behavior discovery, it closes the knowledge gap between advisor/client.

Hortz: Tell us about your Certified Wealth Mentor training and how it differs from other advisor training programs.

Morales: Our Certified Wealth Mentor training program prepares advisors to become more equipped to guide and behaviorally manage the client on through the integrated ups and downs of the life and wealth creation journey. It teaches them to know, engage and grow different clients enabling them to deliver customized lifelong financial planning experiences for sustainable Financial Planning Performance. The DNA Behavioral training methodology is proven to enhance advisors ability to more confidently advise, mentor and coach clients to make improved life, financial and investment decisions based on their purpose. Further, our highly structured and tangible Financial Planning Performance Planning Process provides the platform for enabling advisors to charge higher retainer based advisory fees and increase profitability on a sustainable basis.

Hortz: What advice would you give advisors in how best to work with clients in a fiduciary environment?

Morales: All human beings have a financial personality which includes emotions that can erupt both positively and negatively when dealing with money. These emotions can manifest as over exuberance or fear. Both client and advisor need to understand the behavioral responses driving decision making. Without this mutual insight, every outcome of the financial planning process becomes a potential complaint. Identifying each person’s financial personality regarding how that drives decision making, will reduce costly complaints.

This article was previously posted on Financial Advisor Magazine Online. The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors – Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here.

Know Your Client Communication Behavioral Finance

3 Ways Personality Testing Crushes Risk Tolerance Questionnaires

Considering the tidal wave of fear-driven headlines these days, it’s tough focusing on the biggest issue we should be worrying about. Climate change causing the oceans to rise? Over-exuberant stock market heading for a crash? The New England Patriots winning another Super Bowl?

The problem is that human brains just aren’t wired to make accurate risk predictions. Financial advisors know this, which is why they rely on tools to help them evaluate their clients’ tolerance for investment risk. Combine that with the DOL fiduciary standard, and you can begin to explain the sheer number of risk-assessment models available to advisors.

However, the new legislature has not yet helped us define terms such as “know your client” or how to best accomplish it. In theory, advisors are required to understand the goals and financial circumstances of the client, so that they can create solutions with an appropriate level of risk. That may sound straightforward, but human behavior and the response to risk is complex. What exactly should you measure to get the correct answer?

Risk tolerance questionnaires were meant to help with that quandary. Its primary purpose is two-fold: to take the risk temperature so that the advisor can create a portfolio with the volatility that matches the clients’ comfort level and to give the advisor armor in the event of a lawsuit. After all, concrete and measurable risk numbers should be the best evidence that you have made every effort to offer prudent advice. Right?

Is Personality Testing the Answer?

risk toleranceIf directly measuring anticipated response to financial risk does not work, what can advisors do to get a snapshot of the client while still standardizing and proofing the process enough to hold up in court? One company thinks that psychological profiling is the way. DNA Behavior International, an Atlanta-based firm founded by Hugh Massie, has developed a very different take on the traditional risk tolerance questionnaire.

Their product, called Financial DNA, measures the core personality styles of clients and prospects by combining psychometrics and applied mathematics. With the underlying research powered by Georgia Tech University, the company argues the results of its patented assessment stand longer and are more difficult to ‘game.’ (See How Risk Tolerance Software Is Disrupting Wealth Management)

How do they do it? The Financial DNA assessment is a series of 46 questions – an unusually high number when compared with other products. But you won’t find any of the same-old financial risk questions on the list. Leon Morales, the CRO of the company, explained that the traditional questionnaire format allows users to fake results by choosing what they believe to be the right answers, whether consciously or unconsciously.

Financial DNA uses a set of forced-choice questions that focus on communication style, behavioral biases, and goal setting. The resulting risk profile is based on the snapshot of the clients’ core biases and decision-making preferences and is more accurate, Morales claimed.

The goal of the product is to help advisors become wealth “mentors,” according to Massie. Their psychometric-based system leverages comprehensive behavioral insights to more accurately measure each client’s risk appetite. Their client’s report increases in their rate of asset gathering when using their product versus standard risk tolerance questionnaires, Massie reported.

If that sounds really different from the typical risk tolerance questionnaire approach, you are right. Things get even more interesting when it comes to the execution of the idea.

Risk Measurement Methodology: It’s Harder than It Looks

risk toleranceExisting risk tolerance questionnaires are not without their caveats. Most solutions on the market generate their assessments through a series of financial simulation questions and what-if scenarios. What percentage in a portfolio value decline would a client consider acceptable? Would he prefer a certain gain of 8% or a 50/50 chance of either losing 30% or gaining 100%?

There are 3 potential problems with this approach.

The first one is the overly technical nature of the questions. For a client that’s not financially savvy, the choice between a sure gain of 8% and a chance to lose or gain a larger percentage of the portfolio value can be confusing. Some tools work around this by quoting specific dollar amounts instead of percentages. That approach makes the question more tangible but no less theoretical.

One of those tools is from Auburn, CA-based Riskalyze. Their chief investment officer, Michael McDaniel, believes that their risk number assessment that advisors use to understand how much risk a client can handle or tolerate effectively captures all the impacts of an investor’s psychometrics and personality.
And because [they] aren’t simply relying on human interpretation of different psychometric results, but instead have built a quantitative, objective approach to gathering mathematical data points, [their] advisors tell [them] that the results they get and the applicability of those results are vastly superior to the other approaches to psychometrics that they have used, McDaniel noted. (See Smart and Agile: Riskalyze and Quovo Help Advisors Stay Ahead of Robos)

The second problem is response bias.Wikipedia defines this as a wide range of cognitive biases that influence the responses of participants away from an accurate or truthful response. They are most prevalent in studies that require participants to self-report their responses.

In other words, a self-reported response to a future event is often quite different from the actual response in a real life situation. Sure, a client might tell you he would accept a possible 33% decline in his portfolio value when he is sitting in your office. But that response is probably not the same one you would get if the market were actually crashing to Earth.

A 2012 study of risk tolerance questionnaires showed that many products failed to accurately predict client behavior when they are under pressure. Not surprisingly, loss aversion and self-assessment questions fared better than questions based on economic theory.

Other applications take a similar approach. FinaMetrica also uses a psychometric-based questionnaire, but has 25 questions, which could more suitable for use by financial planners providing a comprehensive multi-goal planning service, co-founder Paul Resnik stated. Late last year, FinaMetrica announced an abbreviated 12-question version that was targeted at enterprise clients such banks and insurance companies that need to generate risk tolerance quicker and scale the process across a larger client base.

The third problem is the complex nature of what we are attempting to measure. Risk tolerance is the client’s willingness to take on risk. Capacity for risk refers to the client’s financial ability to absorb the consequences of taking a risk. For example, a client could have a high stated willingness to choose a volatile portfolio in exchange for higher potential gains. If that same client is so close to retirement that his financial ability to weather a dramatic drop in portfolio value is low, low capacity for risk might render high-risk tolerance irrelevant.

Then there is risk perception: how risky the client thinks the markets (or specific investment choices) are. If perceptions are not grounded in reality, clients can make decisions that are at odds with their risk tolerance and capacity for risk. Most tools lump those three sub-categories of risk into a single number. That approach can be misleading. The relative importance of each component is different for every client, and the one-number answer does not accurately reflect those dynamics.

Test-Driving Financial DNA

Clients and prospects can take the Financial DNA assessment from a personalized link shared by an advisor in an email. Advisors also have the option of embedding the link on their website. The assessment can be done on any device and takes 10-12 minutes to complete. Assessment results identify an individual’s preferred communication style and offer insights into automatic decision-making processes. The tool also places the individual into one of seven risk groups (1 being most risk-averse and 7 being most comfortable with risk).

Once a new assessment is completed, the advisor receives an alert via a sleek dashboard. Results can be used to guide the next conversation with the prospect or client.

Our favorite part of the dashboard is its ability to combine assessment results with real-time market data. Dubbed Market Mood, this feature places every client on a scale from exuberant to apprehensive depending on his or her personal biases in the context of current market performance.

For example, when the market is up strongly, there may be some clients that become anxious about an impending decline. Financial DNA provides recommendations on how best to placate each client based on their psychometric results.

Sleek graphics give the advisor a pulse of the overall client base while the drill-down reports offer specific action suggestions based on every client’s preferred communication style. For example, based on Jane’s portfolio risk group, current market performance, and preferred communication style, the system may recommend the advisor sends a market analysis summary, an informal text message or an invitation to an in-person meeting. Advisors report that Market Mood offers a structured approach to engaging clients at the right time. We also love this functionality integrated with SalesForce and other available CRM platforms. And a deep API build-out?launched last year.

The platform has a few other interesting applications. The system-generated risk group assessment for the client is automatically compared with his or her portfolio risk as well as the advisor’s personal risk group. A scenario in which client Mary has a risk group score of 2, her advisor has a score of 7, and Mary’s portfolio falls into group 6 would be flagged as a potential compliance risk. Within larger firms, assessment results could be used to pair incoming prospects with advisors. Just swipe right for a perfect match!

Another application, shared by family offices that use the product, is in combining assessment results for multiple family members to better predict and manage interpersonal dynamics in decision-making.

Pricing and Implementation

Financial DNA offers three packages based on an annual subscription model:

  • Introductory Package $135/month/advisor.
  • Behavioral Finance Package $290/month/advisor. Includes their Client Market Mood Dashboard plus other options. (Their most popular option)
  • Certified Wealth Mentoring Package $370/month/advisor. Includes all lower features plus additional coaching, training, leadership and team development courses.

Some of the advanced training includes helping advisors and portfolio managers to develop their own emotional intelligence and better understand what biases they bring to the table. This helps firms improve their interaction with with different clients, improves client overall satisfaction and reduces complaints.

Their clients include a wide range of firm sizes from small registered investment advisors to broker-dealers, banks and insurance companies, Massie explained.

Personality Assessment as a Marketing Engine?

Financial DNA offers to improve client communications and create a value-added differentiator that will help with client conversion and retention. Current users offer anecdotal evidence of prospects that became clients because the advisor applied insights from the assessment to structure the conversation in a way that made the client feel deeply understood. The marketing application itself isn’t new: Riskalyze has long positioned its offering as a tool to help advisors improve prospect-to-client conversion. As more advisors begin to use Financial DNA and more data becomes available, we would be curious to see their extended results.

Every risk assessment tool has its limitations. At the end of the day, a risk score or personality profile is only the start of a bigger conversation. The best approach combines an assessment of the client’s willingness to take risks with his or her financial goals and capacity for taking risks. Financial DNA promises to help advisors tailor communication styles to match client preferences and guide triage efforts when the market hits a bump. In giving advisors a tool that goes beyond risk assessment to improve their ability to reach and coach clients, this platform’s innovating approach may be onto something.