Behavioral Finance

Thanksgiving Insights

Using Behavioral Insights To Survive – And Thrive? – At Thanksgiving

Millions of American families will soon come together to enjoy Thanksgiving. But whether it is Thanksgiving or any other event, bringing people together does not necessarily equal a fun time. Why is that?

Its simple: We are all behaviorally different. At a time when family should enjoy each other around a splendid table, there is a potential for long-hidden conflicts, resentments and judgments to surface. Even if the family agrees that certain topics are banned from the gathering, that doesn’t mean that they don’t raise their head in some way.

Family coming together for Thanksgiving celebration should be able to avoid stress and conflict. But here’s a thought: Why don’t families work on their relationships? Why don’t they care sufficiently about family dynamics to try to understand and manage behavioral differences?

It’s a conundrum. Most people sitting around your table will likely invest time and resources into understanding workplace relationships. The point being to ensure everyone works effectively together to produce great workplace results.

Why then wouldn’t the same investment of time and resources be appropriate for families?

Here at DNA Behavior, we are often faced with this dilemma when advising families around their finances. This is a complex time for families. Generations have different ideas about how best to disburse family wealth. It becomes even more complex when each family member has a different approach to money.

Family is the most important group in society and yet it can be the greatest source of conflict and disagreement. Taking time to build healthy relationships within the family through understanding communication and behavioral styles does benefit each individual member in all walks of life.

So, here are five thoughts to navigate family struggles during this holiday season:
1. All families have elements of behavior that challenge us. Think of a particular family member whose behavior is challenging and then list at least three things about that person that you value. Then use these key strengths to build a relationship with them.
2. Make a commitment to understand your own communication and behavioral style and use that knowledge to better recognize how best to communicate with other family members.
3. If you are behaviorally engaged with your family members you will focus on the issue when conflict arises (and not the person).
4. Regardless of your communication or behavioral style, everyone reacts well to appreciation. Consider how often you express this to family members. A word of appreciation and acknowledgement of their value to the family can change the dynamic in a room.
5. Make a point of spending time with a family member that you don’t know very well. Focus your communication on them. Be interested in what they have to say; remember their conversation may not stimulate you, but the fact that you made time for them and listened could be the highlight of their holiday season. (Or may at least give them new insight into you.)

Thanksgiving should be a time to make wonderful memories, and it often only takes one family member to change the environment either for good or not. How about this Holiday Season you make the commitment to be the one to be behaviorally smart and help navigate everyone through to a Thanksgiving to remember?

The takeaway from this is that when a crisis does hit the family, they will be able to unite and draw strength and support from one another. Here’s where to start. Head over to https://dnabehavior.com/start-a-free-trial/ and complete your DNA Behavior Natural Behavior Discovery.

Then forward this article to everyone invited to your Thanksgiving celebration so they can complete their discovery. Then let behavioral insights be the fun topic around the dinner table. Who knows? They may even become one of the things some people are most thankful for this year!

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When Behavioral Differences Impact the Bottom Line

Conflicts in the workplace are nothing new. When handled appropriately, conflicts often produce some of the best work. But when communication exchanges become toxic and disruptive and lead to poor decision making – then it’s a real issue and needs to be addressed.

To those leaders who appreciate the importance of understanding how to manage behavioral differences – good for you; your business is probably flourishing. For leadership that has no understanding and, in my experience, very often even promotes conflict in the belief that competitiveness is healthy and pushes individuals to perform more effectively – you’re missing a business building opportunity.

Behavior differences not understood at best and left unmanaged at worst can inhibit performance, cause unnecessary conflict and will only deteriorate if left alone.

People before numbers

I’ve worked in the corporate and government world for many years and it always bothers me as a consultant when a CEO cites issues such as, teams not aligned, communication problems, incessant complaining to supervisors, lack of business progress and so on.

Business is all about people. Whether they are your customers or your staff. Most conflict within and involving people revolves around unfulfilled needs:

  • Decision making – I want to make them. I want you to make them.
  • Communication – I’m expressive and want to talk. Im reflective and don’t want to talk.
  • Structure – I like order. I’m a free spirit.
  • Trust – Approach me, I’m an open book. I’m suspicious of your motivation.
  • Opportunities – Let’s go for it. I play it safe.

If we have no insight into these basic differences we should not be surprised when there is conflict or that teams can’t work effectively together, worse still, when customers get frustrated and sales are lost.

There is no magic wand to resolve behavioral differences, but there is a significant behavioral insight tool that can reveal individual unique behaviors. Armed with this insight, leaders can use the data to prevent unproductive and negative behavior that leads to conflict.

Know thyself

Most CEOs are frustrated with unmanaged behavioral issues and tend to push those off to HR to deal with or call in a consultant, like me, to make the issues go away. In reality, the starting point for a CEO should not be flicking issues off to HR, but to invest in getting to know their own behavior. That is always my starting point.

It never ceases to amaze me how impressed C-suite members are when they invest 10 minutes to understand their own inherent behavior. Suddenly they are sharing insights with each other – they have significant a-ha moments – they get why colleagues behave or react the way they do. More importantly, there is a genuine willingness to get below the surface in terms of how best to work together, and they make comments such as:

  • Will you let me know when I say something that belittles you?
  • Let’s have coffee together and figure out a better way to run our departments.
  • I see now why all my detail frustrates you – I’ll cut to the bottom line.
  • I understand you need time to reflect and think things through – I get it now.

As a consultant called to sort out people messes, always make sure you engage the leadership in understanding their behavior first. It will make dealing with their company problems much more effective.

Reconciling the differences that will undoubtedly exist between leadership will work toward resolution of wider issues in the organization.

One of the secrets of dealing with workplace behavioral differences is to have a clear journey for each individual. It’s more than a high-level vision; it’s the vision for the individual and how their contribution fits into the whole. When inherent behaviors are known, designing this pathway is likely to bring greater results.

Leverage our know-how

We provide organizations with a plug-in solution, so they don’t have to reinvent the wheel. If you are thinking, we need to address the behavioral differences in our business, feel free to rely on my knowledge and experience, not to mention the knowledge and experience of all my colleagues and our tools.

You can deploy us and our ‘behavioral chip” – DNA Behavior’s API - within your organization and quickly begin solving significant relationship, productivity and decision-making challenges. Imagine: Validated, scalable, practical solutions. Real insights for real results in real time.

Knowing yourself is the single most important 10 minutes you can invest in yourself.
Complete the DNA Behavior Natural Discovery for no-cost and no-obligation. You’ll ultimately get a one-page infographic report with actionable insights. Now, imagine everyone within your organization gaining such insights. THAT’s the kind of bottom-line difference I’m touting.

(Far) beyond risk-tolerance questionnaires

Quick or Quality? How About Both? (And We’re Scalable!)

In looking to leverage human behavioral insights to solve business problems and tailor employee and client offerings, do you want a very few questions that grab some data points so you can just keep moving?

Or do you want a discovery profile questionnaire that achieves results like these?

  • Easy and quick to complete (Don’t have 10 minutes to garner data that will affect decisions and relationships for a lifetime? Quit reading now and let’s go have coffee and talk about your priorities).
  • 91% reliability.
  • Predicts long-term behaviors.
  • Removes situational bias – education, culture, gender, race, etc.
  • Removes emotions.
  • Removes faking.
  • Is non-judgmental.
  • Provides greater depth and breadth of insights – 64 traits and 200+ insights covering all areas (from communication, financial decision-making, setting goals, choosing your role, team building or leadership and advisor development.)
  • Immediately usable results.

Then complete our DNA Natural Behavior Discovery Process, which uses a forced-choice scoring model with 46 simple to understand, non-situational questions that reveal your greatest strengths and struggles.

Small orgs, big orgs – no worries

Even better, we have an enterprise solution so you can have these validated, practical, applicable and scalable insights without reinventing the wheel. Just plug the DNA API into your system.

We provide the behavioral chip that enables you to harvest and leverage people data already in and around your systems organization. That means: Real insights for real results in real time – to tailor financial and other advice; communications, sales and marketing; recruitment, match-for-role, retention and hiring; and just about anything else in which behavior, decision and productivity is crucial.

Quick and quit, results be damned

Or, don’t use a questionnaire structured like DNA Behavior’s, and risk the following outcomes:

  • Results changing all the time; this variation signals that you’re not getting lasting, reliable insights.
  • Taking longer to do and measuring fewer insights and doing so less accurately.
  • Harder to complete because of the difficulty in understanding questions. (One of the several reasons we emphasize that ours produces more reliable results that are not situational.)
  • Not culturally neutral, which is a problem in and of itself but especially so if you’re committed to an even, non-judgmental process and one that embraces diversity by being culture agnostic.

Traditional risk-tolerance questionnaires are a good example of an instrument that might be pretty quick and painless and may ultimately be useless. The time you do invest addresses just one metric, which may not be accurate in the long run. And such questionnaires are susceptible to emotions of the moment and situational bias.

What’s your ultimate goal?

There are endless aphorisms, memes and jokes about whether you want something fast or correct. With we humans it’s usually not an either/or proposition, but a balance of all of the best factors. We’ve been working on DNA’s behavior tech platform for 18 years. So, the 10 to 12 minutes you or your employee or team member or client spend on completing the DNA Natural Behavior Discovery Process will be robust, meaningful, reliable, practical and lasting.

Take a test drive: Complete a no-cost, no-obligation DNA Natural Behavior Discovery here.

Short Investment of Time Can Pay Dividends for a Lifetime

Short Investment of Time Can Pay Dividends for a Lifetime

This article first appeared on Nasdaq.

We’ve been having an interesting conversation in our office about how often we have been required to complete a questionnaire, how long they have taken and the reason for them.

Some of the recent experiences of our team members:

  • Renewing a passport online – 45 minutes;
  • Completing a tax return online – 1.5 hours with all the documentation to hand;
  • Applying for membership at a local gym – 25 minutes;
  • A spouse applying for a part-time position – 35 minutes; and
  • Applying for a young child to go to school – 1 hour.

The topic was up for discussion due to occasional objections from advisors and clients taking a 10-12-minute behavioral insights questionnaire to best tailor their investment advice and financial decisions. Why wouldn’t every investor take 10 minutes to complete a one-time questionnaire that would change their investment approach and increase their wealth?

Moreover, why wouldn’t an advisor use the same 10 minutes to understand how to more effectively advise their clients through a deeper understanding of their own financial decision-making approach, cognitive biases and communication style?

The pause that empowers the process

Comparing the recent experiences of my colleagues to the 10 minutes it would take to reveal behavioral insights that would benefit both client and advisor for a lifetime of investing seems a no brainer, though I am admittedly biased, having spent nearly 20 years working in behavioral insights.

Even if that has not been your focus, it’s easy to see the value of completing questionnaires as outlined – those geared toward traveling, getting healthy, great kids education, work, and of course tax returns. Yet some question the value of investing 10 minutes as a gateway to a lifetime of behavioral insight-powered decision making (and investing).

Assuming a typical advisor minimum threshold for client investing is $250,000, and based on Vanguard research with over 56,000 clients, we know that advisors bring 150 bps of additional value to a clients portfolio through behavioral management. That is 1.5%, which means that an advisor has the potential to bring an additional $3,750 annually just by the client investing 10-minutes for completing a behavioral discovery questionnaire.

Whether you start your investment with a $500 gift from grandparents or are reviewing your million-dollar portfolio, take 10 minutes to get a comprehensive insight into your decision-making approach. Then ensure your advisor invests 10 minutes into you by completing the same questionnaire – then you have a wealth creating partnership. From a teenaged investor just setting out to a seasoned investor – the 10 minutes needed to uncover innate behaviors is unlikely to change with age or through various life stages.

Should my client invest 10 minutes?

Very often in my experience it is an advisor perception that clients will object to participating in a 10-minute behavioral discovery process. Yet when clients understand the go-forward value of that investment of their time, they not only are willing but eager to take part in fine tuning their wealth management.

Of course, advisors who want the edge such a behavioral questionnaire provides must choose one that is truly actionable, unlike the many questionnaires we complete that give us no real value and gather dust on a proverbial shelf somewhere. It’s not a one off, but something that provides lasting value as advisors and clients continue to reference the information.

In fact, with the right behavioral discovery tool, the actionable takeaways should be so practical that clients can leverage the behavioral insights in other facets of their lives beyond wealth planning and money decisions.

Clearer picture, clearer roadmap

Other short questionnaires around the financial industry often look at or reveal just one aspect, for example, risk tolerance. They stop short of providing a full picture of who the client is and can short-change both investor and advisor.

These narrower assessments that have been the norm for many years are outmoded. So, it likely is the time now to embrace more comprehensive behavioral discovery which provides a deeper, broader, more practical and lasting result.

As more people are exposed to the value and power of leveraging behavioral insights toward better and more tailored financial advice, it becomes not a nice-to-have extra, but a wanted, needed integral part of tailored, high-net-worth planning.

How many other things do you and your clients spend 10 minutes on that will not have near as great an impact or lasting return?

Risk-tolerance

(Far) Beyond Risk-tolerance Questionnaires

My colleagues and I have been having an active discussion about the relevance of risk-tolerance questionnaires. So, I was excited to see a Sept. 6 article in the Wall Street Journal by Jason Zweig, “Knowing if you can stomach the next big market swing.”

Not the right data, not enough data

Zweig’s bottom line, “Any good adviser should devote more time to your risk capacity and your goals than to your risk tolerance.” In leading up to that point, he makes the case that risk-tolerance questionnaires not only don’t go far enough in that they target just that one metric, but also says they may not even be accurate in that area – at least not in the long run.

Research cited by Zweig notes that risk-tolerance questionnaires are susceptible to being short-circuited, for instance, by emotions of the moment. Thus, a questionnaire that should be predictive across your investing for years to come may really just reflect your risk tolerance or aversion that day.

Similarly, when looking at what different advisers do with risk-tolerance survey results, we see adviser bias. That is, the questionnaire’s results can be — and are — interpreted by financial pros in significantly different ways. Further, Zweig says its known that advisers often ignore the results of such surveys altogether.

This article identifies the problem with traditional risk profile questionnaires that we overcome with a more objective, non-situational psychometric model — validated insights that provide a fuller, more lasting set of robust data points that may be relied on, theoretically, in perpetuity and which cannot be gamed by investor or adviser.

The right info, better results

Among the differences with our 17-years-in-the-making Financial DNA tools: We do not have market-driven questions that lead to situational bias. We do not get into market perceptions. The questions we ask are neutral to education, experiences in the past, feelings and more.

We get a broader set of insights, including behavioral biases, spending, goals and communication. Most people do not understand risk because it is not explained well and knowing communication style powers better communication on such key points.

The power exists for investors and advisers to better assess risk…and to move beyond just that one metric. Still, I continue to hear — anecdotally and directly — that some advisers think their clients won’t take the time to complete the more accurate and more robust discovery process.

If I am to believe that, then it means most investors are not willing to spend 10 to 12 minutes gaining insights that will impact their portfolio for a lifetime. (Insights that, by the way, also can powerfully affect decision-making and relationships across any and all facets of our lives.)

Rubbish! That’s a supposition I cannot accept.

The proof is in the pudding

A forced-choice scoring model like ours is academically proven to be one standard deviation more accurate than the Likert Scoring Models (aka, situational questions used in traditional risk questionnaires). The traditional scoring model of risk profiles leads to over-inflated scoring and situational results, whereas forced-choice scoring provides a more accurate and reliable starting point for long-term decision making.

The forced-choice questions also lead to more predictive measurement, making a subjective process more objective. For example, non-situational phraseology consistently measures ingrained (rather than learned) behaviors. They lower the chance of misinterpretation. Traditional situational questions lead to inconsistent measurement, meaning responses change depending the situation and market, they are difficult to interpret and require more education, and they tend to over-state strengths (like risk tolerance) and understate struggles (challenges you and your adviser will face).

Finally, a short, tight discovery process deploys validated questions that lead to highly accurate, deep and reliable results which remain consistent for the long term. And again, they are harder to game.

Not convinced? Complete the Financial DNA discovery for no-cost and no-obligation. You’ll ultimately get a one-page infographic report with actionable insights. Now, imagine sharing that report with your adviser (or with your client if you are the adviser) and having this brief investment of your time paying dividends across your portfolio and the rest of your life – for a lifetime.

Business meeting

What’s 10-Minutes of Your Time Worth?

During a recent presentation, I shared our unique DNA Behavior Discovery assessment process (think probing questionnaire) on screen and a skeptic gasped, No one will spend the 10-minutes to do this. I found this surprising and it has still not escaped me.

With all the time we spend on inane things (satirical YouTube videos, social media, reality TV and more), investing the same amount of time it takes to fold a load of laundry or order a few office supplies online to learn something about yourself that will pay dividends for the rest of your life hardly seems like a waste.

How much time do you spend sitting around talking about money (or lack of it) and your desires? Cutting to the chase by getting clarity on who you are and how you make big decisions will come back to you in spades.

I’ve been reflecting on, What is the value of spending 10-minutes to measure your “DNA”- innate behaviors you may not even know you have but which drive all types of critical decision making throughout your life? Below I take a stab at the value. I’ve low-balled this a bit based on research we have today and the ways our clients are using behavioral insights to bring value to their teams and clients.

Before we jump into that data it’s important to know that DNA Behavior has three main segments (Financial DNA, Business DNA, and Communication DNA). When a participant spends 10 to 12 minutes, he or she receives insights from all three segments where we predict virtually every human habit: such as habits for investing, spending, working, communicating and decision-making.

Investing: Financial DNA brought an average portfolio: $3,750++ annually

One of the main benefits of Financial DNA is powering advisors with tools to behaviorally coach their clients. Most advisors leveraging Financial DNA set the minimum threshold for clients at $250,000. Let’s assume this skeptic had the minimum threshold – as I do know they have an advisor. Based on Vanguard research with over 56,000 clients, advisors bring 150 bps of additional value to a clients portfolio. That is 1.5%, which means that an advisor has the potential to bring an additional $3,750 annually just by investing 10-minutes.
Another personal benefit of Financial DNA is revealing clients spending (and saving) habits and the action steps to manage these behaviors. Imagine the value of a tool that could save you 5, 10, even 15% of your annual expenses just by being aware of your spending.

Working: Business DNA could bring $22,540 in value to your time at work

One area where behavioral assessments have been more embraced is the hiring process. It is relatively routine to be required to complete an assessment before landing a job (and often these assessments can range from 10-minutes to 1-hour to complete, with 30-40 minutes being typical). It is not uncommon for applicants to be required to complete five assessments before they land a job, but if a DNA Behavior Discovery was in the mix, they don’t need to complete any of them.

Instead, all participants can receive their Business DNA results alongside their Financial DNA – there is no need to ever complete another pre-employment assessment again as even more robust information is already in hand via the investment in a single DNA discovery. The median household salary in the U.S. is $56,000 (approx. $28/hour). If each process was an hour long – this would save $140.

Gallup did research on Individual Productivity and found that processes like Business DNA reduce stress and unproductive time in the workplace. In fact, Gallup quantified this at an increase of 40% in employee productivity and 70% in team productivity. Again, assuming with the national average of $56,000 a 40% increase in productivity lends itself to a rough savings of $22,400 per year.

Decision-making: Awareness to Check yourself before you wreck yourself: Priceless

The same one-page report that informs financial decisions and workplace scenarios can be brought to bear in any facet of your life. The power of having this validated information at your fingertips is incredible. For instance, pausing to consider maybe five of your strengths and perhaps three of your challenges may change the lens through which you see things, influencing untold decisions.

And think of that multiplied by two. That is, pausing to consider not only your own strengths and challenges, but the same information on the other side of the equation – perhaps a team member, client or even family member who also invested the 10 minutes to discover their own DNA.

I was recently at a business dinner at which a guest produced business card-sized DNA Discovery “cheat sheets” from his wallet. He confessed that he occasionally stops to re-review his own and his wife’s Communication DNA reports. Now THAT’s valuable.

Still not convinced? Consider: It has taken you less than 10 minutes to read this article.

Convinced? Complete a no-cost, no-obligation 10-minute discovery (Choose: Financial DNA or Business DNA).