Financial Planning

How to Avoid the Pitfalls of Money Management?

Part of our human nature is to leverage past experiences to make future decisions. Money management practices are no different. And for those who lack experience, they tend to lean on numbers, analytics, and peer groups. 

Either way, to avoid the pitfalls that may impact money management, you might have to reset your compass.
Find out why this matters to managing your money…today on FinWizdom.

Capitalize on ESG Investing Via Your Tech Stack

– First Published on Nasdaq –

The 1990s introduced “the triple bottom line” as a measure of the integrity and sustainability of a business. Investors wanted to know their money was doing something meaningful, understanding that the “triple” in question is profit, people and the planet. The concept evolved into Environmental, Social and Corporate Governance (ESG) and is increasingly mainstream, less niche.

In fairness, the ’90s didn’t have the technology to support ESG. But now advisors can have validated information at the touch of a button, if they have first invested in tech and data (gathering). For instance, today’s advisors can have a client complete a simple, scientifically validated questionnaire that reveals essential information. This enables the advisor to make accurate, appropriate investment suggestions that match the client personality and risk tolerance, as well as their ESG inclinations.

In support of such, every financial advisory business has some form of tech stack. If it’s easier, think of it as the data ecosystem – all of the tech the firm invests in. Still, not everyone has a plug-in that leverages that tech stack by revealing important behavioral data on clients or delivers behaviorally focused scripts on guiding clients. For those without such, tech makes such a plug-in easily accessible, without reinventing the existing tech stack.

Amp up advice with tech

Connecting technology with financial advice and behavior enables advisors to work more effectively with people.

Tech stacks that match clients to advisors and not just safeguard against advisors putting clients into high-risk or low-risk investments can help advisors fully appreciate what ESG means to clients. Behaviorally understanding clients and taking a figurative walk in their shoes is always beneficial in other ways too. This is when a financial advisor and client can truly develop a solid partnership with a mutual view of the world (including as it pertains to ESG investment needs).

Talking recently to a colleague about this very subject, I was interested to learn that a large gap often exists in the tech capability of firms and the very financial advisors who want and need real-time nudging data on and for clients. While advisors are struggling to keep all the balls in the air, my colleague’s firm steps into the gap to work with advisors to understand the tech stack at their fingertips, so they can use it effectively. (And why not maximize that tech investment?).

One such area: Understanding the client’s need to invest in ESG businesses. What’s behind the “whys,” among other questions. Is it to feel good, look good or to genuinely see such an approach delivering not only wealth creation but a quality life?

For advisors to listen and understand the behavioral shift in investors (their clients!), they need to better connect people to technology and business requirements in order to get investors to accurately connect. (That’s where the aforementioned discovery questionnaire pays dividends.) This enables advisors to deliver targeted advice that satisfies ESG requirements for the investor.

An advisor’s most significant impact must surely be in connecting – via technology – investor feelings to the investment strategy that matches their emotions and still creates the wealth they require for life goals. When advisors get this right, it delivers an incredible capacity to bring about positive change in investors’ lives.

THAT is the bigger picture of the advisor-client relationship – and one that is easy to lose sight of, when focusing on the proverbial trees.

Where ESG comes from, is going…

The shift toward ESG doesn’t always come from an analytical brain; more often it originates from feelings. If this past year has taught us anything, it’s that we are all taking time to consider the next season of our lives, including what we will focus on. What we might do differently.

Thus, savvy advisors are alert to the market for ESG-based investing as it becomes both increasingly popular and more complex, primarily due to upcoming regulatory and compliance changes.

Even now, there are indications that all providers of financial products must consider client ESG preferences when deciding and advising the suitability of investments. Firms and advisors who have already invested in tech that fosters tailored, behaviorally focused client and portfolio management are ahead of that curve – already meeting or exceeding standards that have not even been implemented yet.

In-depth data at an advisor’s fingertips is what this market demands, especially when it comes to popular niches like ESG investing. Advisors can provide more informed, focused and client-specific client guidance. On the flip, clients can make more informed, less-stressful investment decisions, while also seeing that they are part of a process in which they are “seen” and heard and which they can be confident is transparent.

These are some of my insights regarding ESG and technological solutions; I’d love to hear your insights on the same.

Financial DNA Empowering Female Voices

Earlier this year, I sat down with Danny Liberatore from The Wealth Enrichment Financial Group to discuss the impact Financial DNA has had on his practice, and how it transformed the way he works with his clients. 

Working with female investors

One of my biggest takeaways from our identity conversation was Danny’s approach in working with female investors. He mentioned that most of his clients are females and that Financial DNA insights have enabled him to foster meaningful relationships with them.

You see, female investors don’t want to be treated any differently than men, however, their communications styles are different. They want to be part of the process. They have a savviness for the intricacies of our work and appreciate the educational part of it all.

Danny Liberatore

Behavioral finance insights particularly come into play in this situation when you are working with male and female partners. Their dynamics unravel from day one, and you need to pay attention to their behaviors in order to understand them better and manage their biases.

Involve both in the conversation

Danny shared with me that most of the time, the women are different from their partners, in terms of behavior and responsiveness. 

It is no secret that the financial service industry has done a very poor job trying to understand women and genuinely helping them. What happens more often than not is that they are being ignored and their opinions are unsolicited or unappreciated. 

As a financial advisor, you need to be able to wear different hats when working with couples. When you make the effort of explaining things differently to your clients and accordingly to their behavioral styles, you get instant breakthroughs. 

Danny mentioned that he’s made it a habit to always address the wife first and disclose to the husband that while he might be addressing him later on separately, he doesn’t want him to feel ignored or unappreciated. He will ensure to bring the husband back into the conversation and keep her engaged.

The truth is, once you honestly explain your process, your clients instantly feel included. It not only puts them at ease, but it builds trust. And we all know that trust is a fundamental factor in advisor/client relationships. 

This is a common situation for FI’s to find themselves in. When the female is not the breadwinner or the creator of the wealth, you’ve got to make her even more involved, without leaving the male out either.

How it usually starts 

When meeting with a potential client for the first time, pay very close attention to the couple dynamics as they unravel before you. It is common for men to take on the lead role in a conversation with their advisor, especially at the beginning. 

However, if it gets to the point where the female’s opinion is not taken into consideration or is not solicited at all in the planning process, that should be a red flag for you. You need to make the effort to always keep them engaged and involve them in the conversation.

You can also look at it from a business perspective. Let’s say you are taking on this new client that has great assets and potential for revenue growth. If you strictly focus on working with the husband, when life happens and you find yourself in an intergenerational wealth transfer situation, what are your chances to still be the financial advisor for that family? 

Final thoughts..

When working with your clients, it might feel normal to engage the one partner that takes on the role of leader and simply overlook the other. The risk you are running there is to not only alienate one of the decision makers but also falling victim to your own status quo biases. Pay attention to your client’s dynamics, keep both of them engaged, and build what could potentially be a lifetime working relationship.

Are You Dehumanizing Advisor-Client Relationships?

– First Published on Nasdaq –

The phrase Artificial Intelligence (AI) was likely first used by computer pioneer John McCarthy in 1956 at a Dartmouth College conference. And the concept of AI was even on the minds of classical philosophers as they delved into human thought processes.

Today we usually think of AI as computer systems mimicking human behaviors. But do they?

Many such computers are part of business efficiency and there is certainly a place for them. It is, however, important to understand that such systems, introduced in the name of efficiency and economy, often dehumanize the organization and the resulting service provided.

AI and API, but also y-o-u

People are unique, they respond in different ways and they are diverse. Financial advisors and other professionals must have the insight to understand that people – their client-investors and others – have strengths, struggles, biases and indeed breaking points that differ from person to person and situation to situation.

And even the smartest, most experienced advisors and clients only have so much insight, as our perceptive powers often cannot “see” or be aware of innate behaviors. Those go-to behaviors we all have and of which we may not even be aware…that surface naturally, often in times of stress or decision making.

So, just as behaviorally smart advisors understand the limitations of AI, they also understand their own limits of insight. But how to bolster human insight to best serve clients?

Whether intervention comes in the form of understanding emotional reactions to market movement, knowing when a simple call can head off a foolish decision about to be made or something else, advisors need to have significant amounts of insight into their clients in order to offer effective, consistent professional service.

But wouldn’t it be interesting to have both? A machine approach that not only gathered data and offered a range of financial insight, but also revealed human performance, emotions, bias and reactions and prompted the advisor when a client’s behavior (especially decision making) needs addressing?

A personality API (application program interface – think of a “plug in” for existing tech systems, then think of it providing personality insights) can give your data a human element, measuring behavioral insights covering virtually every human habit.

Roberta Smith on line one…

Picture this: You get a phone call from Roberta Smith, who wants to sell a significant stock. This is a big change and you don’t want her to act hastily. You need more information – and insight – regarding what’s driving this decision.

As you access her data on your system, compliments of that handy-dandy personality API, you see that she has a bias toward loss aversion. Not only that, but the behavioral data you have on your API reveals a range of different dimensions of Roberta’s natural style for making life and financial decisions, including her risk-taking behavior.

With the assist from your personality API in hand, you not only quickly access information about Roberta’s biases, but also her goals, spending patterns, risk stance and much more. Such a behavioral management tool gives you insights Roberta may not even have about herself.

Remember, your API is helping delve into innate client behavior, “farmed” when someone like Roberta takes a quick discovery at the very beginning of your initial work together. It may go without saying but is always worth repeating: AI is built on data, and part of the data populating a personality API would include Roberta’s input from her discovery tool.

Armed with client-specific human behavioral insights especially focused on finances and financial decision making, the advisor can safely continue the conversation with Roberta, knowing what’s driving today’s call. You can confidently – insights in hand – and in a tailored manner – because your insights also tell you how best to communicate with Roberta – steer her away from making decisions that will adversely impact her portfolio and life goals.

And this is no secret information, surreptitiously used. After all, you’re not manipulating Roberta, but creating a win-win. Back when a client like Roberta completed the discovery, you would have had a robust discussion around the added advantage you (and she) has by adding “behavior tech” to your other tech and tools.

Human and, not human or

There is no need to dehumanize relationships. AI has a significant place in the financial advisory business, but it must be partnered with behavioral data gathering and linked with API for instant access.

After all, AI and APIs are not replacing you. Rather, they are helping you take clients like Roberta to next-level, best-in-class advisory services.

Do Investors See Value in Wealth Management? They should, and Here’s Why

Do Investors See Value in Wealth Management? They should, and Here’s Why 

The 2020 financial climate may have been the most tumultuous of its decade. However, one thing is sure, demand for wealth management continues to grow. Today’s investors are looking for a comprehensive approach from financial institutions that would guide them forward in this new normal.

The truth is, even in the middle of this pandemic-induced uncertainty and market volatility, executive wealth management decisions were still being made. If you believe that your investors may not see value in wealth management, here’s why they should.

Financial Institution Can Adopt the Model That Fits 

While you might think that the biggest struggle is to have a breakthrough with investors, and enrolling them in your financial planning systems, the real question is where do you take it from there? 

As a financial institution, you have the ability to design your systems and incorporate wealth management components into your practice. Which makes more sense for your investors as they tend to seek out a more holistic approach. 

You see, investors are looking to discuss their entire financial vision with their advisors. Their short term goal is obviously to make smart decisions and see a substantial return on their investment. Their ultimate goal however is none other than prosperity and financial wellness. 

Investors Are Looking for a Financial Wellness Roadmap 

The financial bigger picture has never been more relevant. The pandemic-induced market uncertainty has shaken investors’ confidence in their portfolios and challenged all their strategies. The type of financial institutions they are looking to work with are those able to offer them some clarity and insight into their financial wellness roadmap.

Whilst the unpredictability of the stock market can challenge that concept, it’s all about the relationship your advisors foster with their clients. Here at DNA Behavior we believe that advisors should constantly engage their investors in discussions relevant to them, or risk losing them. 

Wealth Management also Means Behavior Management

You might be asking yourself is it our role to help investors get the maximum profit? Or to manage their behavior?

We believe that wealth management and financial planning risks are at the sum of human behavior (investors and advisors) and market risks. Our whole Financial DNA program for investors and advisors has been predicated on this. Whilst the market itself cannot be managed by an investor, their reaction to it can be. Which comes back to human behavior management. 

75% or more of your role is to save investors from themselves by helping manage their behavior. This involves educating, guiding, coaching and empowering them. What we call “Wealth Mentoring”. 

By adopting this approach you will be helping your investors obtain superior returns which far outweigh any level of fees they are being charged. The reality is that the key to successful investment is managing behavior. Wealth mentoring has the ability of transforming the investor-experience and enhance value.

Digital key in keyhole in information security concept

Financial Advisors See Data as a Differentiator

This article first appeared on Nasdaq.

With financial advisors under considerable pressure to strengthen their competitive position through an improved understanding of their clients, adding a behavioral insight tool to the client onboarding process can help advisors obtain new insights about a client’s behavior and financial personality.

In doing so, it is imperative for firms to interrogate this data that is relevant to each client. The way to use data as a differentiator is to know clients at a deeper level. Their decision-making style, spending patterns, goal-setting motivations, approach to and tolerance of risk, behavioral biases, and responses under pressure, as well as knowing each client’s likes and dislikes and life journey.

Measuring and discussing financial behavior is the first step for advisors to get to know their clients. And we already know that, for advisors to provide valuable advice, it is key that they understand clients and client goals.

Gone are the days of form filling. Advisors need in-depth, accurate information at their fingertips. Clients already understand that life requires them to be subjected to an array of technology experiences. They get it.

What many clients do not accept is poor service. For instance, feeling that they are not front and center of the relationship. Feeling they are a statistic. Feeling like the financial advice they are getting or the way they are getting it is generic or ill-matched to them.

When advisors start to deploy technology which delivers a great experience for their clients, then and only then will they gain a competitive edge and restore broken trust.

The use of application programming interfaces (APIs) is presenting a new and exciting range of possibilities to financial advisors. Essentially, APIs act as a sort of plug in, bringing a specific functionality to other, already up and running systems, so an advisor, group of advisors or small or large organization can add bells and whistles to a system without having to invent/reinvent their own.

Such an API can permit the flow of information between applications and give financial advisors the ability to, in this circumstance, easily access on a real-time basis client data, gain insights and offer innovative solutions tailored to the clients’ life plans while complying with regulatory requirements

Through the magic of APIs, “behavior tech” platforms can now be white-labeled and inserted inside organizations so that they can access scalable and easy-to-use online behavioral management solutions to know, engage and grow every client (and their advisor!).

APIs like this are not tomorrow’s solutions. They exist now, waiting only to be embraced and leveraged. This is the power – here and now – to use behavioral insights to create truly unique and robust experiences for advisors and clients. It engages clients in a way that demonstrates the degree to which advisors will go to enhance the financial planning experience – and the success they can have with and for a client.

Every financial advisor should be able to use interactive business intelligence tools to drill down into client information. In advance of every meeting or phone call the advisor should, at the click of a button, be able to deploy dashboards and personalized information to respond to client needs. This approach can and will create an experience tailored to individual clients’ needs.

Clients and advisors alike want “easy” and they’ve got it if the right API or behavior tech solution is deployed. Everything is right there on their mobile devices.