Communication

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Markets Are Not Predictable, But Human Behavior Is

This article first appeared on Nasdaq.

Understanding how to uniquely manage each client during periods of market volatility is a major issue for advisory firms. So, when you have the capability to predict each client’s reactions in advance of market movements, communication is straightforward, understanding that markets are not predictable, but human behavior is. After all, mismanaged emotions destroy wealth.

In a down market, some cautious clients will panic about losses. On the other side, more extreme risk-takers will see it as an opportunity to buy. Prioritizing the management of clients based on market fear (or lack thereof) and providing corresponding key insights will develop more effective client relationships and retention.

Research demonstrates that markets cannot be predicted by advisors and investors. Instead, advisors should manage the behavioral biases of their clients. In fact, advisors are in an optimal position to do so.

Check yourself before you wreck yourself: Clients need to be part of the discovery process from the outset. This can only be achieved using highly targeted questions via an online discovery process, or verbally. Afterward, advisors can deliver advice based on the client’s goals, rather than the advisor’s perception or interpretation of client needs.

This leaves the advisor better able to align solutions and offerings to who the client is and what they are trying to achieve. It takes the advisors biases out of the conversation. Whether they are the personality biases or personal financial biases, the advice now becomes all about the client. Discovery upfront, as outlined here, delivers both a filtering and alignment that provides greater objectivity on the part of the client and advisor.

Emotional insight

Understanding and managing clients during market volatility is all about their emotional balance. If they are to achieve their goals, its important for the advisor to know how to stop them making silly decisions on their journey via emotion-based decisions or reactions to market movements.

This is where behavioral coaching and educating becomes such a big part of what advisors should be offering clients. Not every advisor, though, is going to have the skills necessary to coach clients in this way.

The use of a highly-validated discovery process that identifies and measures both inherent and learned behaviors will make advisors aware of clients who will react emotionally to triggers like disturbing media headlines or presidential tweets. Advisors with concrete insight can then best manage the client and their reactions for the best outcomes.

Having this insight on clients financial personalities delivers a more sophisticated set of tools into the hands of advisors.

Understanding the wiring and the whys

We humans have certain decision-making biases that are hard-wired early in life. These behavioral biases can be predicted, as they are inherently part of our DNA. The biases usually reveal themselves in times of higher market volatility, when a person is under more pressure or when a major life event takes place.

The key for investors is not to churn their accounts too much in times of volatility. For some advisors and investors whose DNA is wired to be fast-paced, overtrading will be a greater temptation.

As an investor, it’s important to know how much your account is actively managed. Active management can equate to overtrading and, in the end, could be costly or even destructive if not properly moderated.

The other bias to recognize is that investors have a much greater aversion to losses than gains. Those investors whose DNA is wired to be patient and risk-averse will feel the pain of losses much more; so, managing their emotions in times of volatility is crucial. These clients will need a portfolio that is very different from those that are higher risk-takers.

Advisors need to learn how to advise and communicate with each client uniquely in terms of their reaction to market volatility. Again, this is why advisors should consider using sophisticated, targeted questioning to gain insights into client behavior. Having predictive behavioral insight at the start of the client/advisor relationship is significant.

A customer-centric approach in all service industries is essential. But with the scrutiny and attention placed on the financial services sector, such customer focus becomes crucial to the reputation of the business, to client retention and to the overall success of the business. Further, it is a regulatory requirement.

Advice must now be tailored to the individual. One size does not fit all. Advisors who don’t get on board in terms of understanding the behaviors of their clients risk compromising their business and leaving themselves wide open to litigation.

Advisors no longer just need to know how they need to know why. Do you #KnowTheWhy of your client’s life and wealth creation goals?

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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One Way a DNA Solution Plays a Role in an Organization’s Big Picture

I was lucky to be part of the team representing DNA Behavior International at a recent 24-hour event in which teams competed to prototype technology for PNC Banks Asset Management Group. We were there alongside other API (application program interfaces) solutions vendors including Microsoft, IBM, and Envestnet Yodlee.

The competition was a great opportunity to showcase how our data and tech solutions serve as a crucial facet – akin to a computer chip – for larger projects. So, while some of our clients and partners know us as a stand-alone solution, it was fun to see a wide array of really smart people – all PNC Bank employees with a variety of skills, including designers, developers, product managers, project managers, business analysts, and marketers – use the fintech API from us and from many other impressive vendors to design, build and pitch their solutions to a panel of judges.

The three use cases participants chose from were Creating a value exchange for financial planning, Prepare the next generation for wealth, and Deliver content as service. Seventy-five participants on 12 teams convened Sept. 27-28 in Pittsburgh for Triple Crown APIFest: Wealth Management’s Winners Circle, competing for cash prizes, bragging rights and the possibility of seeing their ideas put into production. The teams participating in the 24-hour event were selected from a series of judged rounds and design/review hurdles over the past month.

The intensity of the focused, 24-hour competition drove some especially creative ideas and approaches. It is inspiring.

We are proud and a bit humbled that five of the 12 teams used Financial DNA’s API product in their apps. Ultimately, three of the apps integrated with Financial DNA were chosen among the top five of the event. (These using the DNA chip place third, fourth, and fifth.) Businesses worldwide already use our API to win, so it was fun to see so many talented pros create their own wins with one of our core products.

And, as you might guess, a busy, round-the-clock event like this comes with some aspects you’re not likely to see in a more standard work event: 4,800 pounds of food was consumed, along with 720 cups of coffee, 216 Red Bulls and 900 bottles of water. And seven of the teams pulled an all-nighter.

All told, it was a win-win. All of the vendors API solutions inspired the teams and those teams, in turn, inspired us to think beyond our current solutions. What application or partnership is next on our DNA solutions agenda?

 

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Financial Advisors: Are You Ready To Embrace Artificial Intelligence?

This article first appeared on Nasdaq.

And the hits keep coming, so to speak. Never has every move, decision, and interaction with clients of financial advisors been analyzed to this degree. And that will only become more prevalent. Any form of questionable practice will be identified and challenged. It begs the question, are financial advisors ready to embrace artificial intelligence?

The use of Artificial Intelligence (AI) tools to monitor regulatory compliance is a conversation that is heating up, not just within financial services firms, but within regulatory agencies who are now considering both AI and machine-learning tools to enforce compliance.

This increased automation using AI focuses on Know Your Customer (KYC) rules, Anti-Money Laundering (AML) rules, and tax reporting.

AI isn’t all about policing the industry; its broader use can be used for financial advisors to analyze and understand how account holders spend, invest and make financial decisions, so they can customize the advice they give. The role of the financial advisor will change significantly as machines take over routine aspects of the service offering. The gap left is the key to improving the financial service.

Many organizations that deliver support to financial advisors recognize the importance of understanding people before numbers in financial planning. These organizations tend to be early adopters of AI.

Behaviorally smart financial advisors already use a validated scientific discovery process with their customers in advance of the first meeting. This measurable insight into the customer’s personality, the client’s communication style, risk patterns, decision-making approach, and reactionary market movement pressure points, is available at every touch point so clients can be managed honestly, openly and transparently.

The significance of revealing natural and instinctive financial personality and delivering targeted advice provides assurance, so advisors know the client at the deepest level – among other reasons, to mitigate compliance risks.

Information obtained from the use of an automated discovery process puts clients at the center of the financial planning process; matches advisory teams, clients, goals, and solutions; enables a customized communication approach at all stages of the client lifecycle; builds tailored portfolios; behaviorally manages client emotions; and enhances compliance and reduces complaints.

The financial industry is waking up to the use of AI. It is asking the right questions in terms of how it can add value to business models and satisfy regulatory requirements – thus demonstrating to a skeptical public that they are cleaning up their houses.

Like all technology, AI needs to be in partnership with humans. Financial advisors who use a validated financial personality discovery process work more effectively and efficiently by filtering key information from their client’s online personality profiles to inform the advice they give.

The danger is that too much focus is placed on the use of AI for detecting and analyzing brand sentiment or providing investment insights, even identifying rogue behavior – and yet missing the greater use: Getting to know the customer at a deeper level to deliver the best and most accurate advice.

The financial sector is, in a sense, being forced into this new world. Lack of trust, media and regulatory bodies sharpening their focus on compliance ensure the industry is rushing to find solutions that satisfy regulatory compliance, including staying within the bounds of the DOL’s new fiduciary rule.

Traditionally, a slow-adapter industry, the financial sector has been dipping its toe in the water in terms of using robo-advisors. Investors are drawn to this service as they no longer need to pay substantial fees for something they don’t want, need or in some cases get.

Artificial Intelligence used as a tool to put the client front and center of financial advice can and should be pursued. Technology that reveals below-the-surface information about clients will empower advisors to proactively engage said clients on what matters to them the most and on their terms.

Financial advisors, whether individual practitioners or part of a corporate organization, can no longer get away with pushing inappropriate product to investors. The customers are smarter, and the regulators clued in, so what is the smartest change to make to begin to get back the trust of customers? AI.

Get to know your customer at a deeper financial and personal level. Uncover what they want to do with their wealth. Build a relationship based on understanding their inherent approach to life, offering emotional support and becoming the go-to person when they make life decisions.

Much can and will inevitably be managed by AI automation, but most investors will want the human touch. An advisor who knows the importance of a quick phone call to a client when markets wobble or sending an interesting opportunity to an investor able to manage risk – these are the service touch points that maintain or help rebuild trust in the industry.

Financial advisors need to embrace artificial intelligence in general, and financial personality discovery tools in particular, if they are to stay ahead of the game, deliver more relevant offerings to the client and build long-term relationships.

Why not complete your own complimentary profile and see which behavioral biases may affect your financial decision-making. Click here.

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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Diversity and Inclusion Make Teams Great

This article first appeared on HR Management.

Is diversity and inclusion (D&I) in organizations and teams just the latest HR craze? Or maybe just a nod to equality compliance?

Neither. D&I, when introduced appropriately, mines the rich and often untapped talent within an organization. In fact, understanding what D&I means when implemented within a business can be the change that takes an organization from mediocrity to greatness.

Applied to teams, D&I opens doors to innovation, experience, creativity and an unmatched depth of knowledge. But – and it’s a big but – a multifaceted D&I strategy, if not handled appropriately, can lead to chaos and confusion.

The key is to tap into the inherent behaviors and biases of individuals. A highly-validated behavioral discovery process (think a quick-but-thorough assessment tool for every team player) will deliver this insight quickly, accurately and with comprehensive reports that cover every aspect of an individual’s inherent workplace and life behavior.

Such a process provides insight into hidden abilities, revealing behaviors below the surface that, if not managed, might result in disruptive behavior that could unsettle the team. It will highlight communication styles, which helps build a more engaged and productive workforce. Further, the process delivers a culture of openness, mutual respect and trust in the business environment that should satisfy any cultural or legal requirement.

Be mindful that D&I isn’t just about ethnicity, religion, gender, gender identity, sexual orientation, and other such factors; its also about the behaviors that drive performance and reveal (and channel) such behaviors, biases and communication styles to foster successful team outcomes.

Harnessing these differences without the use of a behavioral insight tool can be challenging, if not impossible. People with different backgrounds bring unique information and experiences to tasks. They also bring a significant range of communication styles, decision-making approaches, and thought processes.

In any team, there will be those who passionately and tenaciously bring a vision to completion. Others will be spontaneous, creative and challenge conventional ideas. And there will be those whose experiences and behaviors cross-pollinate, bringing unique perspectives and approaches to work in different functional areas.

Plus, its good business practice to embrace diversity and inclusion: Complex and challenging issues are more likely to be resolved when a team includes a range of talents, thought processes and behaviors.

Dr. David Rock, co-founder of the NeuroLeadership Institute and Summit, and Dr. Heidi Grant, a social psychologist, note in the Harvard Business Review that, striving to increase workplace diversity is not an empty slogan – it is a good business decision. A 2015 McKinsey report on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35 percent more likely to have financial returns above their industry mean, and those in the top quartile for gender diversity were 15 percent more likely to have returns above the industry mean.

Teams formed based on diversity and inclusion that are behaviorally aware, behaviorally smart and which include a range of different skills, are more likely to examine facts, consider a range of options and opinions, and remain objective. They will challenge each other professionally, without causing offense or disconnect. Biases will be openly discussed and resolved. Counterproductive thinking will be constructively argued to find mutually beneficial solutions. All of this leads to more effective decision making and organizational and business improvement.

As an example, Bain and Co. research shows that decision-making effectiveness is 95 percent correlated with financial performance.

Still, diversity and inclusion cannot be a one-off initiative. You should incorporate D&I at the hiring stage, and it’s a continuing work in progress, made more effective by the introduction of tools that reveal hidden behaviors and communication styles. D&I evolves, so your approach should too.?Diversity and inclusion make teams great and inclusion will set your organization apart from your competitors and improve your bottom 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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Financial Advisors: A Unique Approach Is Essential When Advising Entrepreneurs

This article first appeared on Nasdaq.

Getting to know a client in advance is a sound business approach; getting to know an entrepreneur client in advance is essential. From the first meeting, for financial advisors advising entrepreneurs, be relatable and accessible. They want you to advise them, so, take an interest in their professional and personal life.

Entrepreneurs can’t be put in a box – it’s no good labeling them as just another client, or you’ll lose their business.

Financial advisors must understand that entrepreneurs are driven by the need to succeed and control their own destiny. Also, entrepreneurs can cope with risk in their business, but the same may not be true of their risk tolerance in investing. Entrepreneurs are passionate about what they do and are probably already looking for the next big opportunity. Understand entrepreneur insights like these, and you may be able to build a strong advisory relationship with them.

Entrepreneurs drive innovation. They can kick-start economies. Their entrepreneurial behavior is hardwired in their DNA. Still, no two entrepreneurs are the same. Yes, they may have common inherent behavioral traits, but to know and advise them, advisors should educate themselves on entrepreneur’s multifaceted behavior.

Entrepreneurs are complicated people to have as clients. They’re not looking for mundane advice. Advisors need to learn how to get inside the entrepreneurs head, to understand the mind and the genetics of an entrepreneur.

Entrepreneurs are wired unlike others. They see risk as a pre-requisite to attempting something new. They go into ventures knowing that if they fail, they’ll just get back up and start again. This view of business, for any financial advisor, will ring alarm bells, but it’s manageable.

The key to successfully advising entrepreneurs is to know the client. With the use of a credible, scientifically based, validated behavioral discovery process, advisors can uncover significant aspects of an entrepreneurs decision-making approach. When financial personality is revealed, it can be measured, and this data will enable advisors to uniquely manage entrepreneurial clients life and financial goals.

When financial advisors understand an entrepreneurs financial personality and genetic makeup, they will see how entrepreneurs tend to depart from established patterns of thinking. Their resilience and appetite for risk are inherent. Entrepreneurs are predisposed to have the following characteristics, in descending order of dominance:

  • Resilience – they achieve results, manage setbacks and rationally take quick action;
  • Risk Taker – they confidently take risks and are tolerant of losses;
  • Creativity – they are innovative with ideas and seek to differentiate;
  • Work Ethic and Focus – they pursue goals and are often ambitious and competitive; and
  • Charisma – they understand the importance of connecting with and influencing others to get on board with them.

Even so, being genetically inclined toward entrepreneurialism doesn’t guarantee that an individual will become an entrepreneur or succeed as one. It is just not enough to be born with the entrepreneurial gene, people must activate it. Financial advisors can dig below the surface to understand the dynamics of the entrepreneurial client and then target advice based on what they have discovered. Behaviorally smart financial advisors should be:

  • Comfortable testing the financial validity of an opportunity;
  • Confident enough to challenge ideas and ask questions; and
  • Trustworthy enough to encourage (yet also confront) when the entrepreneur’s ideas are spinning out of control.

When financial advisors understand that entrepreneurs are driven by the need to succeed and control their own destiny, they are less likely to put them in a prescribed client box. They won’t deliver mundane advice, instead, recognizing the importance of educating themselves to better understand the entrepreneurial mind. Remember, entrepreneurs may well think they have all the answers, but wealth creation is surrounded by emotion. Build trust with them. Most entrepreneurs will reject high-pressure sales techniques outright, preferring to build trust slowly. They will want to know you are interested in what they are trying to achieve and might use you as a business sounding-board. But, they will make their own decisions based on your input. So, give them space to think things through.

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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Leaders Win By Putting People Before Numbers

This article first appeared on HR Management.

Our greatest asset is our people. How often have you heard such a statement and then wondered why attrition at the company is off the Richter scale?

After all, its a glib, meaningless statement unless the action supporting it is real. In other words, while increasing the bottom line sustains business growth, it’s the people who’ll get you there. Strict rationality kills culture.

So, if leaders genuinely put people before bottom-line numbers, business will increase, attrition and sick days will drop, and people will be at their desks longer, keen to be a part of something great they are helping to build.

Sound a bit cheesy? Not so. If boards, CEOs and other managers stewarded the finances of their companies as offhandedly as many manage people, shareholders and other stakeholders would be alarmed at the speedy decline of investments.

In fact, failure is inevitable if numbers before people is sanctioned from the top. Said another way, strict rationality kills relationships and, eventually, culture.

Everyone reading this may secretly say, we all know this, but it’s the world as we know it. People don’t have the same value as the voice of our shareholders and the bonus schemes we look forward to.

Maybe so, but an enlightened leadership team, beginning with the C-suite, should recognize that the top priority for the future is building and deploying talent effectively. This requires partnership with the HR department.

Rigorous attention to hiring – not just for talent, but for cultural fit – along with thorough onboarding practices. Add to that the use of a buddy system to get new hires installed quickly and effectively. Deploy talents into identified gaps in the business, and, on that subject, when was the last time you conducted a talent, skills, and gap audit in the business? Just saying.

An organization can’t develop its people unless it sets them up for success. And diversity and inclusion are incredibly important to understanding how to build successful businesses. Yet nothing brings greater inefficiency, and therefore poor results, than failing to connect disconnected people.

We’re all marveling at how Twitter is being used to run the USA: Imagine what Twitter and your attitude toward your people could do to or for your business. It takes just one dissatisfied executive, staff member or undervalued person with a significant following to wreak havoc.

Perhaps you already have structures in place to support and manage your people and if so – wonderful. But, do your people (at all levels) feel empowered and motivated? Do they feel they are valued? Do they understand their important role in organizational success? Do the goals of the organization align with the life goals of the people who work for you? Notably, do they trust you?

Leaders putting people before numbers should be the norm: Candidates eager to come work for you. A positive corporate culture reputation that precedes you, noting the way you value and treat people. Hopefully, even tweets that praise you as an employer.

There is nothing more empowering to any business than to demonstrate trust and transparency and sincere value of the people entrusted to your stewardship. People are smart: Set out a vision in which they are included and point them in the right direction, and they will foster collective success.

When people know they come before numbers and see their leadership demonstrating a real sense of responsibility to staff, they are fulfilled and engaged, and success follows. Such leaders realize that numbers are an outcome. And that what will get them there is their people. People are inspired by great leadership, an inclusive culture, meaningful values, and integrity.

Create this kind of environment by starting with your greatest asset: Your people.

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