Communication

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).

34

When Top Talents Holds Leadership Hostage

This article first appeared on HR Management App.

Every organization has talent stars. The ones who shine. The ones who consistently get wins for the business. The charismatic, in-crowd types.

We all know them. We may secretly envy them. Maybe even some of us are them.

But where do they fit in today’s more enlightened business environment?

To begin with, most leaders would never admit to favoring their rock stars – because that just isn’t politically correct. Yet, secretly, they do.

A healthy working environment for teams (in fact for any group of individuals) is for everyone to be treated equally. When a culture of inclusivity is fostered, individuals work more effectively. When no one person is bigger than the collective culture – and all are valued equally – success is an inevitable outcome.

When individuals and/or teams feel they have a right to certain privileges, resentment creeps in. When individuals have a talent that the business needs, they can easily hold colleagues and leadership to ransom to gain favors. Again, if leadership allows this sort on behavior, this leads to toxic environment.

One of the most effective keys to ensuring that privilege/entitlement doesn’t form roots in organizations is to have a healthy culture that begins at the top. An executive team that is focused on the business, and not on their own salary packages, sends healthy messages to people throughout the organization.

An executive that really works as a team, where they understand each others behaviors, where they have trust and respect for each other – that’s the fertile soil within which to build healthy working teams.

The quickest way to break down and undermine “teamness” is to constantly turn the spotlight on one or two individuals. When hiring key talent, it is important to understand how they will respond to teamwork. Those that present with a persona of entitlement will be difficult to manage and are less likely to blend with an existing team.

This is a time when reliance on resumes must be supplemented by a scientifically based natural discovery behavioral data process. One that reveals what is ticking below the surface. Such lurking characteristics are likely to appear when people are under pressure, so it is best to have this information in hand before a crisis makes it apparent. If not revealed and addressed, a spirit of entitlement damages teams.

One of the keys to creating a culture of togetherness – for the good of delivering the vision of the business – is to have zero tolerance of any behavior that surfaces which would comprise the way teams operate.

Once behaviors are uncovered, decisions can be made on how best to onboard stars and talent. If the business needs their skillset, there will be work to be done to use the personality data to integrate them into their teams.

Further, integration and, therefore, success can be achieved more effectively when the behaviors and communication styles of every member of the team – supervisor and line management – are known.

When this environment of transparency is achieved, rock stars can thrive because their skills and talents are used for the good of the team and the business, and not for their own personal gratification.

No one individual is bigger than the team, and every ego and every bit of one-upmanship is parked at the door. Only when individual behaviors are known and understood can top talent be leveraged in a way that ensures leadership is never held hostage by talent. Why not begin by understanding your own natural behaviour, try our complimentary DNA Behavior Natural Discovery here.

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

The Security of Your Personality

The Security of Your Personality

Individuals often marvel at the amount of data that we have available with the DNA API. The follow-up question (often with skepticism) is what personal information DNA requires in order to provide it. We can now say: “None”, “zero”, “zilch”, “zip”, “nada”.

With the DNA API, participant data can remain completely anonymous – we don’t need client’s names, emails, date of birth, address, assets, anything. All we need is their responses to the psychometric questions.

Improvements to the DNA API:

Over the past year, we have seen trends of security breaches, data leakages, and data misuse. If your firm is as concerned as we are over this then you should be hesitant to provide any of your data to third-parties. Now, if you don’t have a business reason for us to know the identity of your clients, then simply don’t send it to us.

With the DNA API, client’s results are stored in our database using a GUID – ‘Globally Unique Identifier’. It is a 128-bit integer number used to identify people, places or things. In our case, each participant is assigned a GUID by our API partner. We store this value in our system alongside the behavioral data we have available and use this ID as the “name” of the client going forward.

In addition to modifying how we identify participants; we have also added 100′s of new behavioral insights and area adding 100′s more. We now can measure virtually every human habit an individual has for investing, life, working, or decision-making. If you are interested in learning more about our API, access the guide below.

Download the API GUIDE

Clients data is anonymous and lasts forever:

On client demo calls, we are often asked: “if the data remains anonymous on your system, how do you manage clients as they retake the process each year.” The beauty of the Natural Behavior product, the backbone of our API, is that clients do not need to retake the process, ever.

The results last a lifetime with our Natural Behavior assessment, unlike many other behavioral products out there. Natural Behavior is built using a forced-choice model which removes situational bias- this allows us to measure a client’s instinctive behaviors that don’t change after age two. This means that clients don’t have to re-take our assessment and their investing, work, and decision-making habits we provide insights on last a lifetime.

Other security measures we take to bolster security:

In addition, to allowing individuals to remain anonymous in our system, we have also taken many measures over the years to increase overall system security and align our processes with industry best practices. Below are some of the measures taken to ensure the security of the DNA Systems.

Active Security Monitoring:

DNA Behaviors application environment is enabled with a security service to actively monitor all of its resources. This system collects and processes security-related data, including configuration information, metadata, event logs, crash dump files and more. These processes help identify securities incidences in real-time.

This security service helps prevent, detect, and respond to threats with increased visibility into and control over the security of the DNA Systems. It provides integrated security monitoring and policy management across the network, helps detect threats that might otherwise go unnoticed, and works with a broad ecosystem of security solutions.

Security Pen tests:

Throughout the year, DNA Behavior works with an experienced third-party security consulting firm to perform both manual and automated vulnerability scans and penetration tests on our systems. The third-party security experts perform this penetration process using many methods such as those prescribed in OWASP methodology to identify potential vulnerabilities. All the vulnerabilities are then reviewed and fixed by our technology team and a final report is available. This penetration report is available to our client base. To request your copy, contact us.

Undergoing Security Reviews by enterprises:

DNA Behavior caters to all clients, large and small. When we work with large enterprise clients, the team routinely participates in security reviews with their technology team. This provides an objective additional eye on our processes and is readily welcomed by myself and my team.

Reviewing Trends in Security Breaches:

As part of my role, it is my responsibility to regularly review current trends and styles of breaches that are happening to firms around the globe. We regularly review the methods and mode of these breaches and make proactive steps to ensure that we are taking appropriate precautions to prevent a breach of that type.

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

Corporate Governance

Behavioral Insights Improve Corporate Governance

The August issue of Board Leadership, Innovative Approaches to Governance (Wiley) includes Hugh Massie’s article, “Remove the Guesswork of the Human Behavior Behind Board Governance”. You can access the full article here and read a synopsis of it below.

Board governance is increasingly complex. Financial performance is still vital, but there is increasing focus on transparency and accountability. Institutionalizing behavioral insights, along with strategic oversight processes and procedures, can and will deliver an environment that minimizes compliance challenges.

I was glad to have an opportunity to write about this for Wiley’s Board Leadership, Innovative Approaches to Governance, and am happy to share a synopsis of that article here. ( To access the full article, visit here ).

The time is ripe to re-envision how effective boards are shaped in order to provide a corporate governance framework that satisfies and even exceeds legal, securities, accounting and ethics standards. At the crux of this reinvention is the discovery of why individuals and teams sometimes tend to do a “behavioral flip” when under pressure – within their own lives or on the job?

Scientifically validated behavioral discovery (think probing questionnaire) is available and delivers highly reliable insights, robust processes and real-time monitoring systems to better manage behavior and responses to pressure/stress through the board and organizational lifecycles, including detailed reports on where compliance risks may exist with specific members.

We know that human behavior is 93 percent predictable and, therefore, taking a scientific, psychodynamic approach has many payoffs. Understanding combinations of human behavioral factors that trigger emotions when facing key decisions can provide board members, management and other stakeholders with significant insight into the degree to which bias and emotions can skew decision processes.

If culture is not clearly defined and ascribed too at the board level, how then, one wonders, might the organization respond. Deep due diligence regarding every individual is necessary. And if board members are not cohesively aligned under a banner of integrity, honesty and morality, how can they point the organization in the direction of compliance and governance?

While larger businesses are investing more in cyber security and other monitoring programs, virtually nothing is being put toward identifying and monitoring costly board member (and employee and management) behavior risks. The reality is that any person with a weak or temporarily broken character on the wrong team or facing external pressure, can, and will, make flawed decisions.

But who should undertake and monitor this behavior? The person in this role should have the autonomy to liaise with a broad range of internal stakeholders, primarily at executive level, and with stakeholders and customers as needed. They should have the freedom and skills to periodically take the pulse of the organizational culture to establish if intervention might be needed and if corporate governance and regulatory requirements are being adhered too.

Where there is currently a board in situ, undertaking a review should be set against agreed-upon benchmarks. This involves building a profile for the board as a whole, followed by benchmarking existing directors against the board benchmark profile. Once the gaps are identified, it makes the process of filling them easier and likely to be more accurate in the selection process.

The advantage gained by institutionalizing the behavioral insights process combined with strategic oversight processes and procedures can and will deliver an environment that minimizes compliance challenges.

To read “Remove the Guesswork of the Human Behavior Behind Board Governance” in its entirety in Wiley’s Board Leadership, Innovative Approaches to Governance (Wiley) visit this link.