Communication

The Spontaneous Intuitive

This post is part 6 of our 10 part series on Financial Behavioral Insights from our Financial Planning Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 6: Spontaneous Intuitive

Jenny, 48, has been investing for some years now based on her gut feel of what she thinks is going on in the economy and the behavior of the markets. She has a clear idea of what she wants out of life, is confident in her abilities and is quite happy making investment decisions based on what feels right. Jenny by nature does not like reading a lot of research. Just some graphs, illustrations and a few bullet points are enough for her. For Jenny too much analysis gets in the way. She feels too many plans will lock her in and opportunities may be missed.
Financial Planning insights, financial advisor client, client communication styles, client behavior

Behavioral Insight
A naturally instinctive and flexible person with a clear vision will be a Spontaneous Intuitive who is confident with the financial decisions they make but can be impulsive.
Communication key: Provide the broad facts and encourage them to discuss their thinking out loud.

Jenny is the Spontaneous Intuitive who will generally be flexible enough to take opportunities when they are there and not get stuck in over-analysis. This type of person will usually make very confident decisions unless he or she has experienced a very negative event. The key is that they need to have enough prior investment experience to intuitively know that their gut feeling is right. Once a decision is made, a Spontaneous Intuitive will run with it and not look back. They will have a strong sense that things will work out.

The struggle for them is not to be too overconfident in their abilities and make rash decisions that they find out later were poor. The poor decisions can come from insufficient research and also not taking time out for listening to others.

The other dimension a Spontaneous Intuitive must address is that because of their flexible nature they may end up with an unstructured investment portfolio. The portfolio will reflect no attention to asset allocation, appropriate risk weighting or diversification. This is not to say they will be failing, either. Nevertheless, they could suffer from overconfidence and take some big chances that are not well thought out.

An advisor who is a Spontaneous Intuitive will be strong at adapting to changing circumstances and making instinctive decisions. However, these types of advisors need to ensure they have access to solid research to support their recommendations. Also, they need to provide enough for structure for clients and set appropriate boundaries.

Learning Point:

The Spontaneous Intuitive client needs the advisor to provide objective analysis to validate their intuitive feel. The advisor should not allow the Spontaneous Intuitive client to become too over confident in their abilities and make impulsive decisions. Ask the client: Tell me about the best financial decision you made? How do you set boundaries in your life and financial decision-making?

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

 

The Fast-Paced Realist

This post is part 5 of our 10 part series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 5: The Fast-Paced Realist

Max is a 62-year-old senior corporate executive who is used to making difficult decisions. Some colleagues call him Merciless Max for his ruthlessness about numbers. His view is that forecasts have to be met every quarter and a bottom line number delivered. Predictably, Max believes that the same approach should be adopted with his investments. He looks at the portfolio quarterly and makes the tough decisions that are needed to keep the portfolio in line. He calls this re-balancing. At times, however, his rational focus may mean a short-term swing is mistaken for a long pattern, and therefore too much pruning goes on.Client Behavior, White Paper, Financial Planning Performance

Behavioral Insight
A naturally logical and challenging person will be a Fast Paced Realist who is able to make very rational decisions without getting stuck but may be too impatient for returns.
Communication key: Provide the bottom line results and keep the discussion quick.

Max is your classic Fast-Paced Realist who generally knows when to sell winners and cut his losses. Fast Paced Realists do not have an aversion to taking losses. They are rational enough to see that at times selling losers instead of winners needs to happen even if it is embarrassing or causes short-term pain. They will act decisively and move on without getting too emotional when making hard decisions. Further, unless they have been misled by an advisor, Fast-Paced Realists will generally take responsibility for their decisions and not act like they have been burned because it has all gone wrong.

The struggle for the Fast Paced Realist is that their more aggressive results focused nature can lead them to heavily trading the investment account. Also, their natural lack patience may cause them to sell investments too fast because of a market blip. Therefore, the risk is they may sacrifice what is a good long-term investment for short-term results.

An advisor who is a Fast-Paced Realist has the logical strength of being able to help their client make rational decisions. Although, the struggle will be that whilst providing the rationality they may not recognize the clients feelings about the situation and the decisions to be made. Further, advisors who are Fast?Paced Realists would also be more likely by nature to over trade or churn their clients investments.

Learning Point:

Fast-Paced Realists need an advisor to help them with re-balancing their portfolio on a regular basis to maintain diversification, and in doing so show them the long-term investment fundamentals before short-term decisions get made. Ask the client: How do you approach making difficult investment decisions? What type of performance are you expecting on your investments?

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

 

Engaging Your Employees

Mary Lorenz of? CareerBuilder.com recently published an article focusing on management of employees, “How not to motivate employees: 10 management habits to break now“.

The ten habits that are pointed out in the article are great and include – Don’t assume people understand your reasoning behind decisions; Don’t forget that praise is about them, not you; and, Don’t speak negatively about other team members, their peers or senior management and leaders.

It is important to remember that everybody wants to be recognized for their strengths and in an environment where they can use them. This means leaders need to manage people based on their unique strengths. Further, they need to be emotionally engaged with communication customized to who they are. In the end this will build confidence which is the key to performance and realizing human potential.

Click here to read the article.

What are your thoughts?

Framing: Re-frame the Presentation of Ideas and Suitable Solutions

This post is part 2 of our 10 part series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 2:? Framing

Chris, a financial advisor, has invited 20 clients with similar levels of wealth and age to his office for a lunch and learn presentation by Paul Southwick on a new investment strategy. The new strategy is to provide a mix of dividends and capital growth with some downside protection. Chris has vetted the investment and believes it will fit his clients well. Paul uses a PowerPoint presentation with great content in it about the bottom line of the investment and is an articulate presenter. As he goes through the presentation there are clearly some who get it and want to sign up, there are others who are totally confused by the details and switched off, others who want to do more research and some who need to understand how it meets their security needs. After the lunch Chris is very concerned about the mixed reaction and losing client trust. He knows the product is sound and he will invest personally.

Behavioral Insight
The difference between what the advisor said and what the client heard will be attributable to the behavioral lens of each. The communication of products and solutions must be adapted.

Framing, financial advisor, customizing the message, customized experience, client engagementHave you ever attended a presentation like the one Chris arranged and been de-energized, bamboozled and confused by the investment proposal and not responded? Understanding investors learning styles and propensities for receiving information, new ideas, strategies, products and solutions is critical to successfully presenting to them. This will increase the chance that they understand the proposal for what it is and how it is relevant to them.? The mistake many advisors and fund managers make is that they naturally present to investors through their own lens. Instead, they should be re-framing how they present to be much more on the investors unique terms.

Advisors need to appreciate that with 20 people in the room there could be 20 different reactions, because each person is unique. The best way to get around this is to re-structure the proposal being presented into 4 quadrants so that each broad category of behavioral needs is addressed: 1. The big picture and how it relates to achieving goals and bottom-line returns, 2. Indicate how their lifestyle needs are met along with telling them the names of the people involved in managing the product or solution, 3. Address financial security and provide feelings, 4. Make the solution tangible and provide the history and research details.

Learning Point:
Advisors need to use behavioral insights to customize their communication with clients and to re-frame the presentation of ideas and suitable solutions so the client interprets the information as intended.

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

Financial Performance in the New Behavioral Economy White Paper

The winds of change are moving fast through the modern economy, and this includes the financial services industry. What we are seeing is the emergence of the New Behavioral Economy – where the client is king and behavioral finance is in. This means the approach to providing financial services will become client centered and will revolve around behavioral insights.

The Financial Performance in the New Behavioral Economy White Paper is a Behavioral Guide intended to serve as an introductory framework for advisors, so that they can improve the financial performance of their investor clients using validated financial behavior insights.

The Financial Performance in the New Behavioral Economy White Paper includes:

  • 10 practical demonstrations showing how advisors can apply financial behavior insights to help guide and communicate with their clients to more confidently make committed investment decisions.
  • Guidance on solutions for building the financial performance of clients including: Behavioral Profiling, building Behavioral Investment Policy Statements and Performance Reviews.
  • The Financial “Blind-Spots” Exercise for building initial self-awareness and reducing the negative impact of financial blind-spots on financial performance.

Click here to download the White Paper.