Behavioral Finance

Team of five colleagues meeting for discussion

How to Become a Behaviorally Smart Advisor

The financial services industry needs new business models ones that help re-define what a financial advisor is capable of beyond just a numbers oriented investment orientation. The traditional twenty-five year + model of providing investment access and selection is being disrupted by technology and new players coming from other industries. The friction from this evolving operating environment seems to be leading to exploring more holistic and new client-focused experiences that create more engagement and deeper connections.

The Institute for Innovation Development, to explore this further, recently talked with Leon Morales, Managing Director of DNA Behavior International a behavioral finance technology platform designed for financial advisors to Know, Engage and Grow their relationships with their clients and prospects. We discussed the evolving nature and changing value proposition of financial advisors into this more holistic model with advisors serving as client behavioral coaches and mentors.

Hortz: You have frequently quoted from the Spring 2000 Journal of Investing article that states 93.6% of the financial planning process is the behavioral management of clients. We have always understood that being an advisor is, bottom-line, a relationship business but, what does that number tell us about the true nature of the financial advisor role

Morales: All the studies and resulting data that have looked at the issue appear to agree, that client behavioral management is one of, if not the, most important function of financial advisors. Understanding the clients communication style, personality, emotions and fears, these need to be mastered and managed by the advisor. Learning practical ways to understand the individuality of clients, how they make decisions and what triggers their emotions, are key to being able to guide the client over the longer term successfully, coaching them to truly achieve financial goals. What this points to is the ultimate importance of advisors being behavioral managers as much as they are technical managers of investments.

Hortz:What do you recommend as the key steps advisors must take to start strengthening their behavioral IQ and behavioral management skills with clients?

Morales: The most important step required for moving from the traditional financial advisor role to that of a Wealth Mentor is to learn first how to ask much better questions of the client. This enhanced discussion builds greater client relationships and opens the dialogue to reveal core behaviors, biases, reactions under pressure and other issues. Part of our Certified Wealth Mentor program’s takeaways is a list of many key conversation opener questions, used for client meetings. Further, the questions will encourage the clients to probe their own thinking. The advisor then gains insight into how the client makes decisions, the client’s reaction to taking a new direction, or confirmation they are on the right path.

Together with insights from our behavioral reports, this enables the advisor to identify points of alignment between what’s stated in the report, versus what clients are saying. This comparison enables the advisor to zero in on the clients areas of strengths and struggles and narrows down the tension between processes and behaviors that might get in the way of delivering outcomes. This kind of client connection, using our very concrete system, builds long term advisor/client relationships and advisors will know how to manage client bias and reaction under pressure.

Hortz: What are some predictable insights you can discover about your clients

Morales: Our DNA Discovery process delivers insights in several key areas:

  • Communication- -enables advisors to connect and work with the client on their terms
  • Biases - – awareness of assumptions or mental habits that need managing
  • Spending patterns -uncovers money habits that may impact investment strategies and outcomes
  • Risk tolerance and reaction to market movement- provides detailed behavioral insight into the client’s natural risk tolerance and risk propensity

Hortz: Can you walk us through your claim that a behavioral approach, using your wealth management platform, results in 99.5% client solution suitability and additional client value

Morales: The use of the Financial DNA behavioral approach enables the advisor to more deeply engage with their clients. Asking the right questions, and having a robust discovery process that more rigorously breaks down all the elements that make up risk, to a much tighter client discussion, reveals how much risk really needs to be taken, how much risk could financially be taken, and blending learned behavior and natural behavior to cover the right level of risk. Behaviorally smart advisors -who manage these conversations with the client well – will get a much higher level of suitability in what they recommend and what gets deployed or purchased in the end.

Dalbar research shows that 7.45% a year is the potential loss because of investors not having an advisor and making poor decisions. There is safety for clients in having a behaviorally smart wealth mentor manage their portfolio, rather than trading their own accounts. This goes back to the risk profiling where we believe we can get to 99.5% clients solution suitability. Therefore, 91% reflects accuracy from the DNA Natural Behavior Discovery and the other 8.5% comes from the learned behavior discovery.

Hortz: Do you see an evolution in what a financial advisor’s core job is and how they will be perceived in the future?

Morales: Yes. I believe that the advisor needs to become a guide for life for the client and to be able to navigate all the issues clients might face. When the client sees the advisor as their go to person for help with decisions, a trusted collaborator, that not only impacts their financial and investment world, but also life decisions and choices, all of which are foundational and have financial consequences. This kind of advisor-client relationship opens wider conversations regarding family dynamics. Advisors need to be the family advisor, and that’s going to be a big area for them in the future. To do that, they need to broaden their skills to handle a wider range of areas, or at least be able to communicate about them.

Importantly, a core adjustment required is the change from client meetings to client conversations. The word conversation makes the advisor/client engagement process easier, less formal, more likely to deliver open discussions. This adjustment is the process we have been bringing in to some of the firms we have worked with recently.

Hortz: How do you help advisors change their habits and ways of doing business to help them evolve into this new advisor business model

Morales: While education and our Certified Wealth Mentor Program are an important part of the process, a key strategy for DNA Behavior International, in order to help advisors make this happen, is to embrace our role as a behavioral Fintech company. We can now take our behavioral tools, processes and knowledge and embed that into their practices through an easy, accessible, online behavioral platform which provides them with practical and scalable behavioral intelligence across every client and firm employee. They would have readily available behavioral awareness, using our built-in discovery processes, and real-time behavioral management capabilities using our apps. Behavioral management can now be infused into the DNA of the firm.

Hortz: Tell us a little about your steadily growing list of strategic partners (BrilliantFIT, AMP) and how you work with them in extending your behavioral platform and resources to equally support advisors, clients, and other key financial services vendor firms

Morales: We have a wide range of technology integration able to be deployed, not just in the financial services arena, but across many disciplines and industries. With Financial DNA, we are a leader in the deployment of personality and behavioral based tools, but we also have such relationships as our hiring partner Brilliant Fit, based in Melbourne, Australia. They are making inroads by integrating behavioral discovery to the filtering of candidates for management roles and ongoing career development.

We built an alignment with Salesforce, so DNA insights are on the Salesforce platform. We are also currently working with firms on matching advisors to clients based on personality styles. We work with big data to open a significant access to leads by building algorithms to be able to link that data to personalities. We are working with a range of financial planning software groups globally using our behavioral chip strategy to power the behavioral management of the client experience.

Hortz: From your perspective in building to and working with a wide cross-section of financial advisors, what is your best advice for advisors in how to navigate this changing business environment in which they are now operating?

Morales: From my perspective, the first key point would be for advisors to develop their emotional intelligence (EQ). Personal development will make them more effective advisors as they interact with a wider range of clients. Maturing professionally in this way will make them a better advisor in guiding others through life challenges again, an expansion of their roles beyond financial guidance. This approach is what will lead to sustainability of the relationship.

Also vitally important are building more processes inside their businesses, particularly around technology, to enable a customized experience to be delivered. Introducing good technology releases advisors to build business and identify gaps where they need to hire and develop good teams.

A further key area is looking at existing revenue models. The current approach needs to be reviewed considering the changing role of advisors with the ability of advisors to become behavioral coaches to their clients. Knowing the importance of behavioral management, advisors can use these behavioral insights to look at how they make their money.

Delivering goals-based financial planning means advisors need to look at how they bring in a retainer fee for working with the clients on an ongoing basis. The new revenue model needs to reflect: running the annual meetings, helping the clients work out their goals, navigating difficult decision-making situations and transitions. Price points can be reviewed, as they add value through mentoring- coaching clients on how to manage their behaviors towards their goals.

Ill leave advisors with one of the favorite quotes of our founder, Hugh Massie: Strict rationality kills culture and relationships, and unmanaged emotions destroy wealth. Financial advisors will be well served to be able to deeply engage and reconcile client thinking and behavior with that clients life and wealth goals.

Written by Bill Hortz, Founder & Dean, Institute for Innovation Development

The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors – Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here .

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Short-Circuit Client Self-Sabotage And Empower The Advisor

This article first appeared on Nasdaq.

Last time in this space we discussed how the industry is more client-driven than ever. That’s not necessarily a bad thing, unless an advisor encounters a client who will not listen to advice and is self-sabotaging.

There are techniques we discussed to help identify and challenge such clients. We agreed that having client behavioral insights ahead of client meetings (and before red flags occur) is an opportunity to tailor your services to each clients uniqueness. So, while imaging a scientifically based data gathering tool as part of an advisors arsenal, lets take this conversation to the next step.

Self-sabotaging approaches are identified and successfully managed when advisors know that:

  • Every client is unique; and each has different wants and needs that must be known and managed.
  • Every client will have cognitive biases, emotions, fears, anxieties, greed and excitement, at varying levels and combinations.
  • Clients and their families lives are complex and each will have their own thoughts on life planning.
  • Clients are better informed and educated than ever before and may wish to take greater control of their finances, for better or worse.
  • Market volatility, lack of trust, and fear have become real issues for many investors; these facets will dominate many client-advisor conversations and the subsequent decisions.

In turn, this same level of insight and behavioral knowledge empowers the advisors to:

  • More effectively understand client behavior and emotional decision making.
  • Understand how to move the client from a need to control to one of mutual relationship.
  • Manage client fear, based on historical market movements, and build confidence in future markets.
  • Uncover and understand a clients life goals (even those they may not have known or acknowledged themselves).
  • Apply a deeper understanding of client behavior to your work on their behalf.

One of the main reasons clients hire financial professionals is to gain objective, expert, personalized advice. When they approach you as though they were the expert, care needs to be taken to avoid role reversal. Only when advisors are armed with insight into their clients behavior and decision-making style can this approach be managed.

Ultimately, advisors who implement solutions that deliver insights to client behavior can help better manage know-it-all or self-sabotaging behavior. But remember that know-it-all advisors also exist too.

Clients are smarter than you think. You wont get their business if you dont understand your own approach. That is why a healthy and professional client/advisor relationship is built on the premise of knowing me, knowing you (cue the ABBA song of the same name).

With an eye toward the fact that you will eventually do the same for all of your own clients, get to know your own inherent behavior and bias. Not only will this self-awareness enable you to work with difficult clients, it will deliver significant insight in to how best to manage your own behavior + theirs.

Why not begin right now – try our complimentary DNA Behavior Natural Discovery here.

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Are You a Behaviorally Smart Consultant?

Some of the greatest and most successful businesses started in a garage, on a kitchen table, or the idea was first written in a childlike dream journal.

Many of us broke away from safe salaried positions to step out on our own. Not having the desire to chase the corporate or entrepreneurial dream, but all with a passion in our heart and all wanting to be an independent consultant in our chosen field.

But for every consultancy there is a time when you face a cross road. Maybe the consultancy has plateaued and you just can’t get it to the next level without more framework, processes and, importantly, insights. Most consultants know that place and sometimes the solution to re-start the motor comes from the most unexpected places.

It could be a chance meeting; a never before identified hole in the market that you can fill; a restructuring of your target audience or a chance reading of an article like this.

We at DNA Behavior International are looking for YOU.

Not your clients, not your expertise (well, that would be interesting to hear about). We are looking for consultants who know they need another valuable tool in their kit to be able to offer a higher level of expertise to their clients, deploying behavioral insights inside organizations.

Some 20 years ago a conversation took place in which a couple of minds shared their frustration with how they were being served in the financial services industry and we thought, if they had known how to communicate with us, if they had known how to understand who we are and what we were trying to achieve in life they would have kept us as clients. Needless to say, they didn’t.

But the conversation turned to a broader range of topics. Why, we asked each other, do service providers neither know or care who we the client (or customer) is?

We then moved our conversation into our own areas of expertise and what we could do to save the world, or at least, failing businesses. This is what we talked about:

  • How can a service provider get to know what makes their client tick?
  • If they could, would that mean they could offer a more effective service?
  • Would they need enhanced skills in building interpersonal relationships?
  • Would understanding a persons inherent behavior change the way businesses operate?

For example:

  • How people were hired
  • Who was hired
  • Who is the ideal client
  • Building a healthy corporate culture
  • Team spirit
  • Leadership – what approach works, what doesn’t work and how willing would they be to put People before Numbers
  • Would communication be different
  • Might there be fewer conflicts in need of resolution
  • Would individuals have a greater sense of responsibility and passion to delivering the vision of the business
  • And would getting the behaviors right and understood radically impact how clients are treated and how much more likely they are to stay with you)
  • Could the bottom line of a business consultants work be improved if they knew how to impact the behaviors of the clients they work with?

So, here’s what was birthed some 20 years ago out of that conversation.

DNA Behavior International is a behavioral sciences business which uses validated behavioral insights to enable organizations to deliver customized employee and client experiences. In particular, it helps people and businesses with effective communication, operating in their strengths, managing emotions and making smart decisions that helps individuals and organizations discover and leverage strengths.

And this is why we are looking for YOU.

We want to find consultancies who want to partner with us to build their practices/businesses.

We are not focusing on consultants in any specific industry; we’ve found that every kind of industry always has an element of people and behaviors where there is a need to know, engage and grow every client and their employees and clients, to build a behaviorally smart business, that in turn grows your consultancy.

What we are looking for are consultants who want to grow their business using scientifically validated behavioral intelligence solutions.

This is a call to arms for all such business owners who are currently engaged in delivering services to organizations.

Whether you provide coaching, mentoring, training, 0r HR functions, and from the C-suite to the shop floor, DNA Behavior International is looking for you

Partner with us, and our behavioral intelligence solutions will unlock business value for you and your clients and give you a significant competitive edge.

We at DNA Behavior International will be the point of difference that sets you apart from other business consultants.

This solution is already in use worldwide in major industries; we have decided to widen our relationship to include your consultancy.

DNA Behavior International is an international authority in the field of scientifically based insight into Natural Behavior Discovery. It is the world’s only all-in-one behavioral intelligence business platform for reliably discovering all dimensions of personality.

  • Its use can solve 87%of business issues.
  • It can improve employee productivity by up to 40%.
  • It increases team productivity by up to 70%.
  • It increases revenues by 23% per year

So, if you want to know more and receive a complimentary discovery process then link with me and/or message me. carol.pocklington@dnabehavior.com

 

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Hungry For More: When a Meal Surpasses Expectations

Did you ever have a meal so good you wanted to tell everyone about it? I had one recently and want to share the experience with you, but you won’t be hearing about a perfectly cooked piece of fish or an imaginative dessert.

No, instead, I want to share the spark that was ignited during our first interactive dinner, which we called Thought Accelerators: Future Fintech. Think Mastermind and think-tank meets a great meal. The idea, deployed on an evening falling between two days of DNA Accredited Financial Advisor Training in Atlanta, was to bring together participants ranging from beginners to experts to discuss behavioral insight challenges and solutions.

By bringing together individual perspectives across a diverse array of careers and experiences, we wanted to further activate what they had learned and do a bit of forecasting. I couldn’t have predicted the results, how powerfully this group would embrace its collective goal, nor the energizing interplay and takeaways.

I had prepared three questions I hoped would provoke conversation, then began questioning whether to jettison a couple of those. I am glad I did not. Those questions and just one each of the responses follow.

What role do you think behavioral insights will play in shaping the future of financial services industries?

Help advisory clients/investors become more self-empowered: Behavioral insights give them the personal power to put them in control of themselves and therefore money. Rather than the energy of money in financial markets (and the system) controlling people, they can make sound decisions – about money and most anything else.

In some senses that future is here; we must now put this power in the hands of more advisors and other professionals so they can, in turn, magnify the number of clients leveraging their own insights.

How do you think personalization will scale in the future? (Will we need human intervention to use personalization?)

Businesses must garner and analyze the right data points, even the granular ones, and make them actionable to close the intention-action gap if they want to truly achieve personalization. Ultimately, the insights must be so accurate and delivered in a user-friendly way that people see themselves in them and feel understood. Only the power of technology enables this more personalized experience be delivered on a scalable basis. Nevertheless, the tech must set up these deeper empirical inputs to be leveraged by humans or by further machine learning based tech, (perhaps) including AI.

And scale must not supplant personalization; it must foster/enable it. The demand for personalization, up to and including anticipating someone’s needs, is growing and must be part of the equation, whether the insights are powering big data or smaller cohorts.

It was clear that that the right data points to deliver the right adaptive experience in the future which will evolve through machine learning must include hard-wired behavioral insights and not just the typical demographic and transactional information that situationally changes.

How are you seeing personalization of financial services being done today? What do you anticipate will happen in the future?

So far, behavioral science has been used to get people enrolled en masse into a program (e.g. – a retirement solution) but not to change behavior – emphasis is on scale and not personalization. In the future, more accurate data points will be needed to power machine learning solutions, with more powerful humans finishing the conversation.

What that means to me: Helping develop more personally empowered leaders and advisors (the best need to be better) to guide more highly evolved clients who have access to more powerful online information and solutions.

In conclusion, the observation came out that with technology things are changing every 5 years. So, now innovators are looking to build their solution on what will be stable and around for 10 or more years. It was clear to everyone that DNA natural behavioral insights about a person have been scientifically proven to be around long-term. So, there is no reason why DNA Behavior cannot be the common language of a very powerful inter-connected ecosystem of specialized businesses providing apps and services.

Ironically, this meal was so good, I was left wanting more. That’s how electric the evening and its conversations were. So, while the initial goal was that adding this think-tank component to an already-planned workshop would ensure attendees could immediately begin leveraging unique financial personality insights to further help clients achieve greater self-empowerment – and wealth accumulation the result is that we’ll be having more Future FinTech dinners.

I can’t wait to see what great ideas, insights and collaborations are on the menu. If you’re interested in being part of one of these dynamic evenings, please just drop us a line.

To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email inquiries@dnabehavior.com, or visit DNA Behavior

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To Effectively Coach/Mentor, Begin with Validated Individual Insights

As a DNA Behavior Accredited Consultant, I coach and mentor business leaders and individuals daily.

Every person I have coached has begun the engagement by saying in various ways that they want to find and fulfil their life’s purpose. Very often they are at a crossroads and need someone to signpost them in the right direction.

Universal signpost: Personal behavioral insight

Whether she’s a leader frustrated by her inability to drive greater success, or he’s an individual who has lost his way, every issue boils down to one clear truth – the lack of personal behavioral insight.

In the case of the leader:

  • How they lead;
  • How they communicate; and
  • How they manage people.

In the case of the individual:

  • How can I feel more appreciated?
  • Why can’t leadership see my unused talents?
  • How can I find my life’s purpose in work?

Whether as a leader or as an employee, each desire to do a good job that is life-giving and has meaning. But when their endeavours are not appreciated or ignored, people lose their compass. And often lose interest and initiative too.

Digging below the surface I find there is often dissatisfaction. An itch they can’t scratch. A longing that can’t be met. Unless this can be revealed, individuals can’t change direction and realize their life’s purpose. And, without this same revelation, leaders can’t create the space for team members to achieve it.

Fully engaged, focused on success

There are many reputable reports and studies showing there is a definite correlation between engaged employees and creative output, and how these drive business growth and innovation. So, when a client comes to me for coaching, the question of leadership always comes into the conversation.

Leaders have a huge responsibility in terms of creating settings within which people can work to their optimum. But when leaders do not know their people at a deep level, its unrealistic to expect them to establish spaces that enable individuals and teams to become engaged employees.

Gallup, Inc., defines engaged employees as those who are involved in and enthusiastic about their work and workplace. But the majority of employees are indifferent, sleepwalking through their workday without regard for their performance or their organizations performance. As a result, vital economic influencers such as growth and innovation are at risk.

My personal frustration: The many times an individual says, I just want someone to appreciate me and tell me if I’m doing a good job. Such exchanges between managers and employees don’t in themselves produce engagement, but its a good beginning.

Reconnecting the disconnects

When leaders know how to emotionally invest in their people, then real engagement begins. Whenever I work with leaders, I always ask them if they know how closely the success of the business aligns with the success their people are hoping for in their own lives.

Be mindful of the external stressors the people in your organization are dealing with. For instance, they may be dealing with and worrying about things like buying a home, schooling their children, saving for a holiday, paying off their college fees, investing to create wealth, the health of a loved one and more.

Successful leaders know their employees. They understand the power of engagement. They are comfortable having insightful conversations with them. Moreover, this then leads to healthier conversations when an individual’s work level falls off.

That kind of conversation isn’t about criticism and likely begins with, What’s happening in your world that’s causing this slump in your work? How can I help you get back on track? This is where true engagement comes into play and teams are built on trust and commitment to the business.

This is how leaders build and motivate their people. In the genuine exchanges.

Going below the surface

As consultants we need to advise our clients about the importance of getting below the surface of themselves and the people they lead. Some leaders may need to be taught how to engage in this way.

They may feel vulnerable doing it- but here’s the thing, if they want success in their business, getting the people stuff right is the only way to go. They may need to learn that that people stuff is not as soft and undefinable as they think. There are metrics, processes and tools that can help each of us know, engage and grow ourselves and the organizations we lead.

The first step for me in my coaching and mentoring approach as a consultant is for each client to complete their DNA Behavior Natural Discovery process. I can’t possibly advise, mentor and coach when I have no idea what people have hidden behind their personality mask. I wouldn’t even try.

Armed with this in-depth insight, I can then very quickly help them accelerate their performance, enabling them to achieve success on all levels regardless of where they sit in the organization.

Experience the kind of insights Im talking about by taking the DNA Behavior Natural Discovery yourself, at no cost or obligation.

To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email inquiries@dnabehavior.com, or visit DNA Behavior

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How To Build Trust In A Team: A Business DNA Product Upgrade

When we design feature improvements for Business DNA, we look at the hot topics that are raised in our training and coaching events. Last year, a hot topic was, “How to build trust in a team”. I am excited to announce that today, we released an update to the Trust scoring model for Natural Behavior that will answer that very question.

Trust Scoring Upgrade:

This upgrade was a culmination of 5 years of psychometric research and independent validation by our team of PhD’s and data scientists. The bar is now raised for DNA Behavior as having one of the only independently validated psychometric measurements of Trust in the behavioral profiling industry. In addition, this measurement provides our Business DNA Coaches, Consultants and Users with the following in-depth insights (in addition to the other 54 additional behavioral attributes we measure):

  • Trust and Skepticism
  • Delegation and Controlling
  • Openness and Suspicion
  • Approachable and Questioning
  • Relaxed and Exacting

If you want to know how to build trust in a team, you must first understand how your team builds trust. While asking questions and drilling in on details can build trust for some team members, that same activity may feel like a lack of trust to others. Trust building is not a one-time activity, but trust erosion can be. In order to build trust, you must consistently behave in ways that are seen to build trust with your team. Knowing how each member of your team responds naturally around trust can help you hit the right note with your team members and help you understand why something you do successfully with one person is failing with another.

How to measure trust in a team using Business DNA:

The Business DNA Natural Behavior assessment is an online questionnaire process that takes 10-minutes to complete. You and each one of your coworkers can spend just 10-minutes to complete their own assessment and compare your results. Each individual’s Trust score will be available in each individual’s 1-page factor Report, Workplace Operations Report and the Coaching Report.

How to build trust in a team:

Ready to build trust in your team? Our experience tells us that the first step to build trust in a team is to help each person understand each other’s unique style. The self-guided Team Report profiles an experiential walkthrough of the behavioral patterns for each of your team members and is intended to build trust by opening the lines of communication for each person’s unique style.

Are you Naturally Trusting or Skeptical?

Are you naturally more trusting or skeptical? Find out in just 10-minutes with our free trial. Experience Business DNA with this free trial and see how business leaders, coaches, and consultants discover the talents, communication styles, and personality profiles of employees and customers.