Communication

Partnerships and Money Personalities

In the past few weeks we have had a number of people contact us who are starting some form of business partnership together. Most of the time their request has been to find out more about their differences. Some of the typical issues they are seeking to understand are:

1. What are our different talents?
2. What should our role in the business be?
3. What areas do we have to watch out for?
4. Do we have shared values and purpose?
5. Who else should we hire?
6. How do we communicate with each other?
7. How do we hold each other accountable?

These are all very important questions and it is important they are always addressed in structuring and managing a partnership.

However, there is another dimension that needs to be understood and is seldom directly addressed. That is the influence of different money personalities.

1. What are the different money personalities of each of the partners?
2. What is each partner’s different relationship to money?

In essence, we need to know their DNA Behavior. How will each partner behave with money based on their financial behavioral style? This is absolutely critical to the success of the partnership. So often partnerships do not work or certainly fail to reach their potential because of the different financial attitudes. The different financial attitudes will have a large bearing on their respective goals, what each wants from the business, how they will handle money in the business, how the business is financed and the business development plans. You will even find the financial attitudes of the spouses will be important as this is another partnership to which each of the business partners is accountable and is strongly influenced by.

If one partner is more dominant, then his or her financial attitude will prevail and have a strong influence on the outcome of the business and the decisions. It is my experience from working with many partnerships, and first hand from being in partnerships, that each partner having a healthy relationship to money will be foundational to success. Just have a look at some partnerships that you know of that have worked and failed. Ask why? Money is nearly always there in a big way. Do not be afraid to find out the answers early as this will save a lot of pain later. This is important as having shared values and knowing your respective talents. If not understood, it will become a major road block.

Shirt Sleeves to Shirt Sleeves in 3 Generations

In recent years there has been a lot written about how wealth created by the first generation (the entrepreneur) is lost by the third generation. Often the second generation has also added to the wealth. Then the third generation has lost it through being irresponsible, idle or simply making poor decisions.

Research from a range of sources is consistently showing that this is happening in over 70% of family wealth transfers.

A significant aspect of intergenerational wealth loss is related to the fact that the financial and estate plans do not adequately take into account the human issues involved. Very often poor communication and relationships within the family along with negative emotions lead to bad decisions. The reality is that many wealth transfer plans whilst technically sound become redundant the day after the wealth transferor passes on.

So, how can you improve those statistics so there is greater intergenerational wealth preservation and also family harmony?

The solutions are found in some interesting research undertaken with a high number of wealthy families by groups like Family Office Exchange and also The Williams Group. Their research points to the top priorities for the families are now to address areas such as family legacy and the family relationships. Whilst investment competence is important it is somewhat low on the list. Investment management is generally seen as a given and considered somewhat of a known science. Notwithstanding, getting the family to adopt these priorities and change their behavior is another matter. If you are an advisor, accountant or attorney what areas should you spend the most time on?

The importance of building greater family unity cannot be underestimated. The family needs to have a defined legacy with a shared mission and set of values. This then becomes the framework and platform for family decisions, dealing with businesses, inheritance, financial education, philanthropy and so on. If needed, bring in specialists to deal with the human dynamics and facilitate this. We often do this with advisors. So, I would really encourage for family meetings to be held. Whilst this process can be expensive in some cases, it does not have to be. Just being aware of the importance of these issues and doing a little more to work on them even through more “relational” discussions will help. Of course, for a high net worth family with many financial complexities and plenty of family history then a family meeting is a great idea and will lead to great results.

Changing Lives with Powerful Questions

Today, I listened to a great presentation by Tal Ben-Shahar who teaches positive psychology at Harvard University. Interestingly, his 2 courses have been rated the most popular in the university. No wonder, he is so motivating.

The message he delivered was that if you want to change the reality of people’s lives then you need to change the questions you ask them. The right questions can change people’s lives. This is when miracles happen.

Think about when your life changed or you made a major change in your life. Was it because someone asked you a great question? Very often it is. I know many of my significant life choices have been prompted by a great question. Furthermore, I remember the people who asked me these life changing questions.

How do you ask these life changing questions, or what we call in our business powerful questions? They must be positive or what is often referred to as appreciative. Always come from a positive angle or the person’s strength, regardless of what the situation is.

If you want to be more structured or scientific about it, then you can have the person complete a behavioral profile first. Then you know their areas of strengths and interests to which the questions can be directed.

The same approach can be followed with a person in any area of your life: whether it be clients, team mates or family members.

Behavioral Profiles Leverage Your Intuition

In the financial services industry there are a lot of supporters for the use of behavioral profiles as part of the client discovery process and there are some detractors from using them. Like in any situation where there are detractors most have not yet had a positive experience or seen the full benefits or simply have been listening to the wrong information. This is human nature.

Overall, I do believe that you can never have enough information about yourself, your clients and also your team. As Benjamin Disraeli said: “The most successful people are those who have the most information”. Of course you also need to have the best and most accurate information.

In my past few blogs I have made a very strong case for how by discovering the behavior of your clients you can help them achieve better investment returns and overall make better decisions. So accepting there are very strong benefits for discovering the behavior of your clients, the question becomes how do you do it? This is where there is a great divide. Although, in my view an unnecessary division of thought and approach. At the center of great client discovery is asking the right questions, or what I call “powerful questions”. I believe this is more effectively done when you use behavioral profiles and your intuition, not one or the other.

For some, client discovery is only done by asking questions and gauging the reaction of the clients to the questions in terms of how they respond. To a large degree, in this situation the advisor is relying on their intuition to firstly ask the right questions and then secondly to assess the response. There is no doubt a person’s intuition can be very strong particularly with a lot of experience and high degrees of self understanding and overall good people skills or what we call emotional intelligence. However, no human being can be perfect and we all have “blind spots” or things we do not see. A person’s blind spots will also be carried across into how they see others. Your ability to understand another person can be significantly impacted by how you are on that day let alone how the client is on that day. So, no matter how good your intuition normally is it is not always going to be accurate. Nevertheless, do not discard your intuition. That “gut feeling” or pulse of energy can be telling you a lot even if you have not yet analyzed all of what it means. A behavioral profile will help you with that analysis.

I know that I am a highly intuitive person and naturally learn a lot about people from conversations and asking questions. This is particularly true now that I have learned to get out of my own way and also because much better listening and empathy skills have been learned. Even then I still do not see everything. I am able to go much further and make the person I am mentoring or conversing with feel far more understood when I use profiles.

The point is that the “human element” is variable and we cannot by ourselves see everything at all times. So, what can we do to make our intuitive radar stronger? This is where well constructed and highly validated behavioral profiling systems that objectively measure human behavior can be used to leverage your intuition. As is illustrated by the graphic, there is a great amount of “below the surface” information about a person you need to find out about very quickly to help them make the right decisions. Further, the person also needs to know it for themselves so the have personal clarity. Often the 10% we see on the surface is the “party manners” and not the real person.

 

The specific benefits of using behavioral profiles in the discovery process to build a financial life plan include:

  1. Enhanced objectivity, consistency and measurement
  2. No assumptions are made about the client
  3. The provision of a natural starting point for safe discussions with clients on their unique terms
  4. Separation of your and the clients emotions ? avoid advisor bias
  5. Acceleration of trust because the same discovery questions are asked of each person within a couple, family, team
  6. Clients are better equipped to better articulate their thoughts when emotional
  7. The ability to more quickly gain greater clarity of issues which you intuitively identify
  8. Specific identification of strengths, struggles, aptitudes which provides a human capital development framework for wealth mentoring and coaching
  9. The ability to better manage client expectations based on greater clarity of needs and goals
  10. Serve the clients on their unique terms: “one client – one plan”
  11. Meet the know your client rules because through better documentation and discussion of client behavior
  12. Increases the transferability of the client relationship because the client behavior is data based

In using a behavioral profile the key is to firstly understand the purpose of the instrument and what it was designed to uncover. Then secondly, understand how to properly use it in client facilitation to get the maximum benefit for you and the client. The great users of a behavioral profile understand it is a tool which gets below the surface but it is not a substitute for discussions. Further, one has to be realistic that even the most reliable and accurate profile will not tell you 100% of who a person is. However, they can tell you a lot. As already said the profile is supposed to leverage your insights and ultimately improve the client experience. The key is your “bedside manner” in using the profile.


Managing Your Clients Through Turbulent Times

Well the stock market has gone to 10 year lows. Has it hit the bottom? That is not necessarily the crucial issue although this downward spiral will be raising more fears. What is crucial is how you handle this situation in terms of your own behavior and managing that of your clients. If you read my last blog you will see research is showing that advisors are on the whole not going far enough in client discovery and in particular understanding behavior.

Here are some tips for managing your clients which are all based on having greater behavioral understanding:

  1. Help your client to objectively face the reality of their situation. This requires understanding how they will innately respond to times of change and difficulty. Are they a rational decision-maker or a procrastinator?
  2. To make your clients feel comfortable and respond to your advice communicate on their terms not through your lens.
  3. Re-evaluate your clients risk tolerance – most measures of risk tolerance are situational. You really want to know their hard-wired risk tolerance as this will be the paradigm from which they make decisions now and in the future.
  4. Build a behavioral portfolio for your clients – base the asset allocation on who they are.
  5. Review the clients product suitability from a behavioral standpoint.
  6. Re-build the overall financial plan recognizing who the client is and their changed circumstances.
  7. Critical to helping your clients move forward is to help them find what their true life purpose is. After all they will still be breathing tomorrow. So lets get a positive state of mind on how they will live their life.
  8. Review your client service team. Have you got “round pegs in round holes” for serving the clients? The advisor client match process is very important.
  9. Transform the client experience you provide. Look how you can make every aspect of it totally client centric and you will be amazed at the bottom line results.
  10. Project positive energy and confidence. This means being very comfortable with who you are and your planning approach. People like animals sense fears and will react.

Remember times of change and difficulty bring opportunity. Are you up to it?

Uncovering Human Behavior Risks

Generally in business, and particularly in financial services, people associate risk with the markets or economy. What we fail to drill down into are the risks caused by human behavior. Another way of looking at this is to consider how people handle the market risks. What decisions do they make? What solutions do they come up with? How do they manage their emotions? How do they communicate?

In essence, the market risks can be managed or exacerbated by human behavior. So, what needs to be better understood is how your people are going to handle market and economic risks that may be impacting your business. This will be particularly important when they are under pressure. What are their blind spots? What are your blind spots? Then, how will you manage your people so the risks are better managed?

Through our Financial DNA profiles we are able to reliably predict how people will behave and therefore the risks they may cause. Will they take too many chances? Will they be too impatient? Are they too independent and not accountable? We have found that the profiles are able to provide great insights into the true behavior of people when they are under pressure. Having this information can help you put in place the right management controls and also to provide the individuals with more self-awareness of how they will make decisions which could cause or exacerbate market risks. There is no doubt a large part of the success or failure of businesses in the long term comes down to being aware of and managing human behavior. You only have to look at some of the major corporate and banking disasters to see this.

So how aware are you of the risks that your people could be causing to the future of your business?