Behavioral Finance

Setting Your Quality Life Purpose

First Published on Nasdaq

More and more these days I’m asked my thoughts on the meaning and quality of life. This global pandemic, including being on social lock down, has caused individuals to have deeper discussions.

Many of us agree that we were having these “life” discussions when we were in college, newly married or considering our career choices. Now as adults facing so much uncertainty in the world, we are returning to these life-shaping talks to review or audit our lives, evaluating where we go next.

Golf and Revelations

I recently received an invitation to attend a golf lesson event via video conference being hosted by a financial planner. This was too random not to attend. But before the event I spoke to the host who told me that he was looking for innovative ways to stay connected, not just with friends but also with clients. So he hired a golf pro to demonstrate not only golf swings but also to give tips on how to “read” a golf course.

His intention was to bring together key people in his life who he knew were having similar life discussions, but not just to talk, but to do and enjoy something together. In this case golf.

He went on to tell me that, over the past three months, he had come to the realization that he was spending far too much time working, building wealth and growing his businesses, and too little time with his family.

Appreciating how many of his early life values were being compromised troubled him, he dug out an old journal from his youth to read. Years before he had written on the first page:

  • I will always be able to articulate my purpose.
  • I will endeavor to have balance in key areas of my life.
  • I will live with purpose and intention.
  • I will responsibly attend to my wants and needs.
  • I will have a plan for giving back to the community.
  • I will be a present and responsible head of my family.

These statements were guided by the values, goals and socio-cultural context in which he lived. Knowing that he had moved so far away from them was troubling.

A Season of Revitalization

After the Zoom golf lesson ended, the ten attendees talked about this being a season of revitalization for them. They talked about catching a new vision for their lives, for their businesses, yet all agreed how far they had drifted from their quality life purpose and plans and how important it was for them to re set their life compass.

Interestingly, we all shared news about the video conferencing events we’d been invited to. Golf was obviously of interest to us as golfers and was a small step toward refocusing our quality life. Even as we talked and laughed about the video conference events we’d been invited to (learning to cook, attending a music recital, exercising at home, portrait painting, dress making), it led us to question what would people in our personal and business world want to be invited to? Clearly not all of us would be interested in such video conference invitations.

What kind of events would we run that add meaning to life? More importantly, how would we even know what quality life and meaning looked like in the lives of those people if we didn’t know them at a deeper level.

This led to a wider conversation. Given that many people were having profound and meaningful conversations and looking at their lives through a completely different lens, how could we work with them or their clients to ensure our service offering genuinely added value to their quality and life goals?

Further, how would we know what those were? As a group we’d forgotten or laid aside our own quality life purpose to some degree. So, how then to now engage with family, friends and clients to understand and gain insight into what a quality life looked like for them?

‘Money Confidence’ Is a Key

From my own perspective I’m already seeing investors keen to understand their financial personality as they make potentially life-changing decisions. They clearly see how understanding their financial personality will build “money confidence” to make decisions that build a quality life performance in the areas of:

  • Life purpose
  • Career
  • Finances
  • Health and Recreation
  • Community
  • Relationships
  • Confidence
  • Wisdom

Over the next few months, I will unpack the importance of understanding how having a clear quality life purpose and plan can lead to significant money confidence. I hope you will join me on this journey that is at once both introspective and collaborative.

Using A Behavioral Science Tech Stack in Investment Committee Decision-Making

This article first appeared in Nasdaq

Most investment committees have a clear mission: Serve as stewards for assets of the organization they represent.

The committee must develop an investment plan according to the financial needs and circumstances of the corporation. So, if the primary role is to approve the fund’s investment objectives, how then do you ensure members of the committee have the appropriate behaviors to fulfill their role without bias?

The answer may lie in using your tech stack to power the investment committee – and its workflow.

Your next-gen investment committee

Recruiting the right people to this critical role – including having in-depth knowledge of their decision-making abilities – makes the difference between the success and failure of the investment committee.

But how do we define that fit-for-role? Is it a professional background? Education? Investment knowledge? And where does the diversity lens come in? (Or is it missing?) What about committee members’ inherent risk tolerance and behavioral bias toward investments?

Research demonstrates there are definite biases (both investment behavioral biases and workplace behavioral style differences biases) that should be considered when forming a committee with such weighty organizational responsibilities. Therefore it is increasingly important to know the inherent decision-making behavior and bias of each individual and how, in a diverse group, these differences will be managed.

Add this to your tech stack

As is the case with all critical appointments, the key lies not with their education qualifications, experience or talents, but with their ultimate behavior. What innate behaviors do they have – of which they may not even be aware – that will influence decision-making, especially financial decisions and/or those made during crisis?

Without the use of a validated behavioral profiling system of some sort, selecting individuals for an important function like an investment committee becomes little more than a lottery. And those are some weighty decisions to leave to chance.

Some financial leaders may not want to hear that their own perspective and powers of discernment may not be the only tools needed. Still, leaders committed to building the tightest, most reliable and trustworthy investment committee will want to introduce a behavioral finance (BeFi) tech tool that hones team member selection for the best possible fit and outcomes.

And why not? Tech is now an accepted part of so many aspects of financial processes, including throughout and across the investment community. In this case it is not usurping the wisdom, judgment and experience of leadership, but supplementing and heightening it by making key insights about potential committee members easier to access.

Financial planning and wealth management organizations are now investing in their value tech stack for everything from market insights and model portfolio construction to manager selection, cybersecurity and, yes, BeFi; so, using behavioral science (BeSci) to create a diverse investment committee should be welcomed, not daunting.

Behavioral diversity and better outcomes

Remember that diversity of opinion – about potential committee members and among committee members (once selected) – may not just come in the form of understanding different behaviors, bias and decision-making styles, but in experience, given that not every member of an investment committee has to be a financial expert. What is important is that members should have a wide set of perspectives and a willingness to be collaborative and open.

That’s why a depth of insight into the individuals to understand their decision-making approach and their likely response under pressure is crucial. Without such, important investment decisions will be flawed.

Selecting a BeSci expert, whether internal or external, to guide the committee using a behavioral discovery process can add a dimension of diversity to the investment committee by ensuring the group can function collaboratively and effectively while also preventing group think and other pitfalls you – and the committee – may not even know they were experiencing.

Behavioral Science: Don’t Just Survive – Thrive

Behavioral Science: Don’t Just Survive – Thrive

This article first appeared in Nasdaq.

Where does Behavioral Science fit in business? This is a question I am increasingly asked by financial leaders.

They can see how behavioral science, nudging and behavioral economics have become significant topics, yet cannot always see the “fit.” More importantly, they want to better understand the advantages. (And, no doubt, the investment.)

Simple answer? If understanding human behavior is foundational to your business, you’ll greatly benefit from BeSci. The type of industry you lead is less important than the business need to understand your people and customers.

Insight as an edge

I get to see firsthand how the application of behavioral science data in any business has profoundly changed the way leaders, advisors, policy makers and practitioners increase productivity. And market share.

One such area of business is financial advice (natch). When advisors have tools at their fingertips to deliver validated insight into the client behavior experience, they are able to intervene to steer clients away from poor life decisions in this time of pandemic-nervous market volatility.

The financial industry still has much to do to satisfy Know-Your-Client regulations and provide a quality customer experience. Those goals are even more challenging during this market. But behavioral insights enable financial advisors to manage investor behaviors remotely.

The entire advisor-client experience has shifted in ways unimaginable a few months ago: No face-to-face meetings, relying on social media platforms, clients and advisors stressed, and behaviors surfacing that lead to bad (financial) decisions.

Consider that advisors who previously invested in BeSci solutions are not only managing through these tough times; many are building their business, as the leverage chaos into opportunities. Especially in challenging times, advisors find themselves major client influencers. More coach than just advisor. That’s only possible when advisors understand clients’ financial personalities.

Learning from the past

The financial crisis of 2008 heightened the awareness that rational behavior was not a realistic assumption to make in times of market crisis. Wise advisors recognize that, without a depth of insight into client behaviors, they cannot hope to keep clients on track.

Behavioral science has burgeoned since 2008. It’s relatively simple – employ a quality data gathering behavioral tool to understand clients. It’s also not expensive and the results far outweigh the investment. And the productivity and success pendulum quickly swings upward upon implementation.

Power your platform with BeSci

Remembering that each is 100% unique and delivering the corresponding customized service is nearly impossible, even if your advisory practice is relatively small. There is no one-size-fits-all approach that will work across the board.

But if you can find a behavioral science tool that is enable by an application programming interface (API), it allows you to leverage in BeSci to existing systems, platforms and methods, so you are improving your proverbial wheels, not reinventing them.

A proven behavioral science API enables your team to quickly integrate to humanize your platforms with rich, scientifically validated, personality driven insights to add a human touch to your digital solution giving access to hundreds of behavioral insights.

Whether you are looking to match clients to advisors, customize and personalize an experience or ensure a good fit for a team or role, access to this level of behavioral insight can help you succeed. Leverage and customize the experience across entire organizations from client-facing engagements, marketing, planning and investing and compliance.

Clients will feel, see the difference

Putting behavioral science knowledge to use demonstrates to clients that the advisor is keenly interested in their unique wants, needs, goals and challenges. In this way, BeSci has the follow-on benefit of signaling that the advisor values and invests in long-term client relationships – and the robust outcomes that follow.

4 Critical Questions Financial Advisors Need to Answer Now

4 Critical Questions Financial Advisors Need to Answer Now

Amid the COVID-19 pandemic, financial advisors amongst other professionals are facing new challenges in the way they manage their clients’ investments and communicate with them. It is no secret that no matter how many financial crises we have gone through in the past, these are uncharted territories that we are all learning to navigate. As a financial advisor, it is your responsibility to consistently communicate with your investors and reassure them that you do have a plan.

Choosing who to trust to manage their wealth is one of the most important financial decisions your clients will ever make, and now more than ever is the time for you to show them the value you are bringing, and how much of a quantifiable impact your expertise has on their financial success. If you haven’t already, you can soon expect to receive wary phone calls from your clients seeking reassurance about their investments. These are the 4 critical questions you need to be ready to answer:

1. Am I going to be okay?

At this time, what your investors need more than anything is reassurance. It is hard not to worry about the impact of this market downturn on their financial future, and the only person they can turn to for guidance is you. Your role is not only to develop an investment strategy designed to meet their goals, but it is also managing their expectations during market volatility. Financial DNA can predict which clients are the most fearful and how to communicate with them, we call this Market Mood.

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2. Do we have an alternative financial plan?

This right here is what makes all the difference between many brokers and financial advisors. Your number one responsibility is to put your clients and their money first. Your expertise is used to its full potential in times like these when it is a matter of speculating what comes next, and what is the right move for their investments. This is an inevitable conversation that you are bound to have with your investors, and the key here is to identify every client’s unique set of communication patterns and comfort zones, and approach this conversation with those insights in mind. You see, every behavior drives a specific fear, that you need to unravel and address.

For example, if your client’s behavioral type happens to be Strategist (one of the ten unique styles of Financial DNA), the most effective way to approach this conversation is by having a quick phone or Zoom call, where you reassure your client and reinforce the fact that the volatility of the market will not derail achieving their goals, and provide a clear plan for how this is actually an advantage.

Download out 2020 Behavioral Finance Guide for RIAs

3. What steps are you taking to proactively anticipate change and new opportunities that are right for me?

Some clients (particularly those that have a higher risk profile) will react to the current market events with an opportunistic eye. For these clients, they are interested in the strategy and opportunity that they can take advantage of with the current market. We coach advisors to identify these clients with this Market Mood and use this as an opportunity to increase their AUM.

The truth is, this question is not necessarily tied to times of crisis. The very purpose of a financial advisor is to constantly anticipate changes in the market, and identify new opportunities for their investors. The COVID-19 pandemic-induced market instability is no exception. What your investors are really asking is “How much should I expect to lose?” and “Is this a buying opportunity?”

The key here is to re-address their risk tolerance. Financial DNA advisors do this by re-focusing clients back to their Financial DNA results. The results don’t change when the market changes, allow your client’s financial behavior, behavioral biases, and risk measurement to drive this discussion.

A good resource to learn more about the notion of Behavioral Biases is our extensive study of Predicting Behavioral Biases with Behavioral Finance.

4. Is my portfolio designed to match my risk tolerance?

Generally speaking, when identifying a person’s behavioral tendencies, you can predict how they will react to any given situation. Whether they are experiencing great success or under a great deal of pressure, using behavioral insights, you can always anticipate what their instinctual reaction will be.

Your clients’ behavioral tendencies do not change or fluctuate over time, neither will their reactions at their most stressed point. So when a global financial crisis occurs, you should not only be able to anticipate their reactions, but you should also be prepared to address their concerns in a way that aligns with their unique set of communication patterns.

You can learn more about how Financial DNA measures risk here, and the best way for you to experience it, is to try it yourself. Start your free trial today and let us see if we can pinpoint your risk behaviors and investing style.

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Manage differences by managing communication

Manage Differences By Managing Communication

Nikki Evans – our Chief Learning Officer – recently authored an article, “Managing differences by telling stories and finding common language, for Training Industry. A synopsis of the article appears here; we encourage you to use the link above to read the full article, as well as discover other great Training Industry articles.

There are many ways to consider managing (human) differences in a work environment. Different goals, different knowledge levels at the onset of a project, different levels of commitment to the team/business, and different abilities and talents. All are important to consider when leading a team.

Managing differing communication styles is one method. That can mean finding tailored ways to reach each type of employee. Or you can find universal ways to reach many different employee types/styles at once.

Either way, it’s important to learn about different personality types and communication styles, including your own. The key: What is someone’s innate behavioral style? Behavior they display, whether or not they are even aware of it.

This can be especially crucial information for leaders at any level. As a leader, you can start to pick up on the style of those you are leading based on the questions you get and the way your team members speak to you (or the way they don’t).

Yes, there is a “go to” method of communicating that resonates with all communications styles. We’ll leave that nugget to be discovered in the full version of this article.

For now, an example

In a recent leadership meeting, our pace was quicker than previous executive meetings. The leader frequently provided a high-level overview of points and opened discussion.

When the leader took a deeper dive into the material and was more detailed, the team energy drifted and people in the room began looking at their devices. The leader then adjusted and included more real examples and even invited people to provide real-life scenarios.

By adjusting the presentation to allow for more discussions and examples from participants, the leader was able to get the team more engaged and better overall results from the meeting.

Behavioral Insights Reveal I’m an Entrepreneur!

Imagine a life spent working for someone only to discover late in the piece that you had all the makings of an entrepreneur.

You may instinctively know that you have a strong desire to start a business. Perhaps you harbored an innate desire to create ventures, but just needed confirmation to take the leap.

Hard wired behavior is inherent. It can be revealed. It can deliver significant insight into your DNA wiring that puts you into the driving seat of your career choices.

Our research concludes that entrepreneurs who have built a business in excess + $1m in turnover will have the following “genes” (natural “hard-wired” behavioral traits) in descending order of dominance:

  1. Resilience – achieves results, manages setbacks, and rationally takes quick action.
  2. Risk Taker – confidently takes risks and tolerant of losses.
  3. Creativity – innovative with ideas and seeks to differentiate.
  4. Work Ethic and Focus – pursues goals and is often ambitious and competitive.
  5. Charisma – ability to influence people to follow them, often having a balance between being outgoing and reserved

These genes are more pronounced for those entrepreneurs who have built businesses with a turnover of more than $10m.

We Did the Research

At DNA Behavior we extensively researched the subject of Entrepreneurial Genetics using our validated Business DNA Natural Behavior Discovery Process as the foundation. Our analysis that a person is born with entrepreneurial genes is supported by other similar findings in academic research and studies.

Step one of your life journey may be to understand IF you are an entrepreneur, but step two is knowing how to manage what you now know about yourself.

You may discover you are headstrong, driven, energetic, inundated with ideas, passionate, a risk taker, expressive and convincing. Qualities all needed to be a successful entrepreneur but remember you will rely on others to bring your ideas to market and need to know how to manage the behavioral differences you will face with others.

Entrepreneurs must be multifaceted and dynamic yet be laser sharp and narrowly focused. Their many duties require a uniquely talented character, but differences in personality and perspective can determine success or failure. It is not surprising therefore, that the number one genetic trait of an entrepreneur is resilience as this is foundational to survival in life and business.

We want to put you on the right path to understanding your entrepreneurial strengths. With the use of behavioral science, you can have this data in real-time on any device.
Below you have an opportunity to complete a 10-minute questionnaire that will reveal significant self-awareness. It’s free.

I’m an Entrepreneur – What Next?

Good question.

Regardless of where you are on your entrepreneurial journey, there will be challenges. Without personal self-awareness of the above five key traits, even the most gifted entrepreneur will crash and burn. Whilst a strong sense of purpose will keep entrepreneurs motivated during challenging times, behaviorally smart individuals face challenges knowing that through them, they will learn and grow.

Look again at the five entrepreneurial genes and ask yourself these questions:

  1. Which of the above entrepreneurial genetic traits am I most dominant?
  2. Am I leveraging the dominant one? If not, why not?
  3. Who is alongside me as a partner or integrator (master key executive) to bridge the gap of the less dominant genes? And is that support successful?
  4. Who else do I need on the team and in what roles?
  5. Resilience is an essential quality to succeeding in any business, but how is my work/life balance?

Understanding the genes that make you a successful entrepreneur is very empowering. These insights provoke deeper thinking about the essential success factors and to consider how to activate your underused talents for building a business, and life, with meaning.

We have a great deal of on line resource for entrepreneurial coaching and mentoring to help you on your journey. Just reach out.

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