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Know Your Client and let them share in the experience

Know Your Client and Let Them Share in the Experience

The question we are most often asked is will my client want to participate in the Financial DNA Discovery Process? Our Wealth Advisors have had very few clients resist participating. The reality is people do enjoy learning about themselves. It can even help in their business and personal lives. It is liberating for them to know what their strengths are and struggles are from a validated process. The key point is that the client feels understood. Further, people love to talk about themselves. After all, that is their number one topic.

So, why not guide the discovery process and let them talk about themselves. If there is a barrier in an advisors mind about their client participating, it is usually just in their own mind.

The important point in getting the client to participate in the Financial DNA Discovery Process is to ensure it is introduced as a normal part of your service. Taking that further, connect it to your desire to provide them with a customized life-long service experience, set their goals and help them not make emotional decisions in reaction to events and markets.

If a client refuses to take the discovery; does that tell you something about the prospect or client? Having full transparency can enable your firm to grow and prosper. If you have a client that isnt willing to participate that says a lot about their behavior. If they trust you with their money, dont they trust you to know them better? You dont want to increase the risk in your firm, by not having transparency with your clients.

The process can start with Communication DNA Discovery; which only takes 2 -5 minutes and the rest of the steps can be progressively introduced over time.

We have many success stories using the discovery process. Click on this link to read about a recent successful client story.

If you are feeling any resistance yourself, then there is no harm in completing the process to find out and experience for yourself the power of the experience. You will feel liberated and want to ask questions!!

Learn more about Financial DNA Discovery or to start a trial click here.

 

Know Your Client Communication Behavioral Finance

WTF DNA (Why Try Financial DNA)

So, you’ve decided that using a behavioral finance tool can help your practice. You have taken the trial, learned from the training how DNA Behavior’s tools work, and how to understand your different types of clients. Now comes the most important part: how do you implement these new tools into your office’s routine? Good financial advisor offices are like singers: they can all sing “Sittin’ on the Dock of the Bay,” but not all audiences will like the way certain singers add their twist on the song. Most good singers are able to read their audience and know when to change their tune. As a financial advisor, do you know how to read your audience and change your approach? That’s what we’re here to help you with.

Many of the questions we get revolve around wherein the client acquisition cycle the discovery process should be implemented. Several current clients of ours will not schedule a meeting with a new client until they have completed a Communication DNA Discovery. This happens for several reasons:

 

  • So they know best how to open the conversation with the new client
  • How you present to a Goal-Setter (get to the bottom line) is very different from how you would speak with a Stability person (Soften your tone)
  • Having this one key piece of information can be the difference in winning, or losing this client and offers an immediate differentiation from competitors

Let’s say, Charles, an advisor, just met with the new client and understands their preferred method of communication. What comes next? Before any talk of investments or portfolios comes into play, Charles must understand their natural tendencies. This is where his new client should complete the Financial DNA Natural Discovery process which really gets under the surface so he can truly understand what their goals are. But, Charles needs to understand a couple of key points before putting this in place. The first key is that he needs to commit to it. He must have a complete buy-in that is obvious to his clients. When they see how important it is, their buy-in will be that much easier and will simplify the rest of the process. The second key is that it needs to be early in the process. Charles needs to figure out if he can work with this prospective client so he’s not wasting his time with someone he won’t be able to please. Otherwise, if Charles doesn’t let them know how important this can be they will have a hard time completing it if he does not convince them that these tools are essential to the success of their relationship.

It is important to remember that the power of DNA Behavior’s tools is in the questions we give you to get the conversation going in the right direction. You will be able to naturally connect with 40% of the prospective clients that walk through your door. Will you be able to change your song to connect with the other 60%? The answer is now a simple YES.

Try Financial DNA for yourself today.

 

behavioral fnance

So You Think You Know Me? Here’s What You Missed

Do you think your sales team is connecting (i.e., maximizing revenue) with all the advisors in their territory? They might tell you they are but read on.

I’m very intuitive, said the wholesaler of a major asset management firm. Excellent, we should get along very well, I replied.

I was talking with a wholesaler who wanted to learn more about one of our behavioral solutions, Communication DNA.

The wholesaler’s goal was straightforward: Show me a solution that decreases the amount of time it takes me to get to know an advisor so trust can be built immediately.

The wholesaler was skeptical about what I was saying so we decided to do a test. We had been talking for 30-minutes (about the same amount of time you talk with an advisor) when the wholesaler suggested to me that he could already tell exactly what “type” of personality I was.

Game on, I said.

OK, here’s what I’ve gathered so far about you in the first 30-minutes:

  • Fun
  • Fast-paced
  • Very sociable and enjoys people
  • Likes to take the lead

So what did I miss? asked the wholesaler.

Just a few pieces of critical information that most sales people miss about me (and why they lose the sale):

  • I can be very fun but turn into a “driven, goal-oriented” individual, especially under stress. Do you think an advisor’s job contains any elements of stress? As a wholesaler, you could keep going down the fun path when I have taken a sharp right turn. If you are not with me, I may smile and act like I am listening, but I have totally disengaged.
  • Getting me to make a decision: Tell me stories about how you have helped others like me. Don’t try any other “closing technique.”
  • Trusting you? I am loyal beyond belief. But you need to prove yourself from both a competency level and people skills in equal amounts.
  • The amount of detail: Don’t confuse me with the facts. High- level first or I will not even listen or worse yet, cut you off. I will let you know how much and when I need details so follow my lead.

Now the wholesaler was ready to listen: How could I possibly get all this behavioral intelligence before an advisor even decides to do business with me?

You don’t have much time to create a good impression and to get an advisor to trust you. Find out how to become a behaviorally smart wholesaler. Your business success depends on it.

Are Your Clients Cheating on You- 2 (1)

Are Your Clients Cheating on You?

He’s Just Not that Into You. Some of you may remember this popular advice book about relationships. So what does that have to do with financial planning?

Knowing that 93.6% of the financial planning process is the behavioral management of the client, I’d say the answer is plenty.

Fifty-five percent of investors with $500,000 or more in investable assets worked with three or more firms in 2014, said a study by Hearts & Wallets, following a behavior the financial research platform refers to as “stable two-timing,” where consumers balance a self-service firm with a full-service firm. That total is up from 49 percent the year before.

The research suggests that the behavior may be driven by consumers who want to use different web tools or online capabilities, or who want to obtain different advice perspectives.

But, in addition, what if your clients are sensing “you are just not that into them?”

You might think that is impossible. After all, you are doing all the right things: delivering solid performance numbers, inviting them to client events, and conducting engaging annual reviews.

Enter personality traits and behavioral biases. Do you know how each one of your clients feel during times of market volatility as well as the specific action you should take for each unique individual?

With market dips, you may be feeling the opportunity to buy some bargains and assume that most of your clients trust you to do the right thing. But getting them a value doesn’t mean they are feeling good about the volatility. You assumed you trained them to look at the long term so all is right with the world.

However, your client might be wondering why you didn’t pick up the phone and give them a quick call of reassurance. And so, over time, this behavior leads the client to the feeling “you are just not that into them.”

That might be why the $500,000+ crowd could be cheating on you. They are hedging their bets and seeing which relationship is worth keeping for the long term.

No advisor wants to admit they may be lacking in relationship skills. But why leave it to chance? Now is the time to adopt a system of objective behavioral intelligence so you can keep your clients in a long-term committed relationship with you and your firm.

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Don’t Let Behavioral Biases Cost You Money!

A key principle to remember is that each client reacts differently to the same market events. This is because they each have a unique mix of behavioral biases. This begs the question, how will you manage your different clients’ emotions as the market changes?

In the financial planning process, some clients tend to make financial decisions that are based on past experiences, personal beliefs, what they like and to avoid mistakes. Fewer people make well considered forward thinking, long-term life financial planning decisions. But, each approach suggests a bias.

Writing for News Limiteds The Australian, Platinum Asset Management co-founder and managing director Kerr Neilson asks the following question.What is the biggest factor in investing? What is it that separates the winners from the losers? You might think its experience or numeracy or a particular understanding of an industry. All of these factors will be relevant, but the distinguishing feature is surely the presence of bias.

This is an interesting thought and much in evidence in the financial fraternities articles and blogs. But what is bias? How does it play into financial decisions? Can it be uncovered?

Investopedia explains ‘Bias’ as:

Some common psychological biases plaguing investors include: representative bias, cognitive dissonance, home bias, familiarity bias, mood and optimism, overconfidence bias, endowment effects, status quo bias, reference point & anchoring, law of small numbers, mental accounting, disposition effects, attachment bias, changing risk preference, media bias and internet information bias. http://www.investopedia.com/terms/b/bias.asp

Can behavioral biases be uncovered?

Yes they can, because each person has an inherent hard-wired behavioral style which is the core of who they are and can be predicted with the right discovery process. Behavioral biases influence not only their behavior, but also their decision-making process. Daniel Kahneman (winner of the Nobel Prize in Economics) refers to this as a persons automatic decision-making biases in his 2012 book “Thinking, Fast and Slow”.

Robert Stammers, CFA Director, Investor Education notes in his article for Forbes – Perhaps the best advice for individual investors regarding bias is this: Avoid trying to outsmart the markets and instead work to outsmart yourself. Through self-examination and reflection, learn to recognize your own biases when they rear their heads.
http://www.forbes.com/sites/cfainstitute/2011/12/21/three-behavioral-biases-that-can-affect-your-investment-performance/2/

Financial advisors need to be able to uncover a clients biases. Having this insight in advance of planning not only enables the advisor to educate the client, but it also flags areas where the client can be steered away from their emotional bias, which results in taking action based on feelings instead of facts.

Writing for the European Financial Review, H. Kent Baker and Victor Ricciardi observe:Investor behavior often deviates from logic and reason. Emotional processes, mental mistakes, and individual personality traits complicate investment decisions. Thus, investing is more than just analyzing numbers and making decisions to buy and sell various assets and securities. A large part of investing involves individual behavior. Ignoring or failing to grasp this concept can have a detrimental influence on portfolio performance. http://www.europeanfinancialreview.com/?p=512

A useful starting point in the advisor/client relationship is to uncover and understand that you, as an advisor, have your own investment biases and blind-spots that must be managed so that clients are not influenced by your behavior. Revealing these biases for the advisor, as well as the client, ensures a) the relationship will be built on trust and b) it will help mitigate the influence bias or predilection can have on decision making.

Does-Behavioral-Coaching-He

Does Behavioral Coaching Help?

Financial DNA Market Mood for Advisors_April 2015

The ROI of addressing the human side of wealth management has long been questioned. However, we intuitively know that behavioral management of the advisor and client is the primary driver of the end result. There is so much benefit for clients in having a financial advisor who is prepared to behaviorally coach them.

For the past 21 years Dalbar has been producing its Quantitative Analysis of Investor Behavior (QAIB) report which demonstrates that investors underperform the market by a wide margin:

  1. The average equity mutual fund investor underperformed the S&P 500 by a wide margin of 8.19%. Further, the broader market return was more than double the average equity mutual fund investors return. (13.69% vs. 5.50%).
  2. In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.

Given these gaps, it begs the question as to the role of the financial advisor as a behavioral coach to keep clients out of their own way from making sub-optimal decisions. Also, this brings up another question, why dont investors hire a financial advisor? Do they think they can do better or is it lack of trust or high fees?

The Dalbar QAIB report for 2015 confirms the Vanguard Alpha Advisor report which values behavioral coaching at 150bps per year. This is a significant ROI.

Underneath all of this, if the advisor has a practical way of holistically understanding their clients financial personality and the behavioral intelligence at their finger tips to use such insights on a real-time basis then they can easily be a behavioral coach. Have a look at the Financial DNA Market Mood Dashboard at www.financialdna.com

 

KEY FINDINGS AS OF 2015

  • In 2014, the average equity mutual fund investor underperformed the S&P 500 by a wide margin of 8.19%. The broader market return was more than double the average equity mutual fund investors return. (13.69% vs. 5.50%).
  • In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.
  • In 2014, the average fixed income mutual fund investor underperformed the Barclays Aggregate Bond Index by a margin of 4.81%. The broader bond market returned over five times that of the average fixed income mutual fund investor. (5.97% vs. 1.16%).
  • Retention rates are

- slightly higher than the previous year for equity funds and

- increased by almost 6 months for fixed income funds after dropping by almost a year in 2013.

  • Asset allocation fund retention rates also increased to 4.78 years, reaching their highest mark since plummeting to 3.86 years in 2008. Asset allocation funds continue to be held longer than equity funds (4.19 years) or fixed income funds (2.94 years).
  • In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.
  • In 8 out of 12 months, investors guessed right about the market direction the following month.