Know Your Client

Does Behavioral Coaching Help

Does Behavioral Coaching Help?

Financial DNA Market Mood for Advisors_April 2015

The ROI of addressing the human side of wealth management has long been questioned. However, we intuitively know that behavioral management of the advisor and client is the primary driver of the end result. There is so much benefit for clients in having a financial advisor who is prepared to behaviorally coach them.

For the past 21 years Dalbar has been producing its Quantitative Analysis of Investor Behavior (QAIB) report which demonstrates that investors underperform the market by a wide margin:

  1. The average equity mutual fund investor underperformed the S&P 500 by a wide margin of 8.19%. Further, the broader market return was more than double the average equity mutual fund investors return. (13.69% vs. 5.50%).
  2. In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.

Given these gaps, it begs the question as to the role of the financial advisor as a behavioral coach to keep clients out of their own way from making sub-optimal decisions. Also, this brings up another question, why dont investors hire a financial advisor? Do they think they can do better or is it lack of trust or high fees?

The Dalbar QAIB report for 2015 confirms the Vanguard Alpha Advisor report which values behavioral coaching at 150bps per year. This is a significant ROI.

Underneath all of this, if the advisor has a practical way of holistically understanding their clients financial personality and the behavioral intelligence at their finger tips to use such insights on a real-time basis then they can easily be a behavioral coach. Have a look at the Financial DNA Market Mood Dashboard at



  • In 2014, the average equity mutual fund investor underperformed the S&P 500 by a wide margin of 8.19%. The broader market return was more than double the average equity mutual fund investors return. (13.69% vs. 5.50%).
  • In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.
  • In 2014, the average fixed income mutual fund investor underperformed the Barclays Aggregate Bond Index by a margin of 4.81%. The broader bond market returned over five times that of the average fixed income mutual fund investor. (5.97% vs. 1.16%).
  • Retention rates are

– slightly higher than the previous year for equity funds and

– increased by almost 6 months for fixed income funds after dropping by almost a year in 2013.

  • Asset allocation fund retention rates also increased to 4.78 years, reaching their highest mark since plummeting to 3.86 years in 2008. Asset allocation funds continue to be held longer than equity funds (4.19 years) or fixed income funds (2.94 years).
  • In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.
  • In 8 out of 12 months, investors guessed right about the market direction the following month.
Focus on the Behavioral Coaching of clients

Focus on the Behavioral Coaching of Clients

Have you ever fully dissected the value of the service you are providing to your clients? This is an exercise that I highly recommend you do as a way of reviewing the value proposition to your clients and the brand promise. Whilst many advisors do not want to be measured solely on the investment performance, this is what typically happens. It is easy because the results are reported in a very tangible way.

However, the real value of what you do is in the behavioral management of your clients. That is how you manage the impact of your client’s emotions on their decision making through the ups and downs of the markets and life. As an advisor, ?your role is more than the education of your clients about the technical investment and financial management issues. Further, it is more than teaching your clients behavioral self-awareness. Your role is to guide the client and positively influence their behavior. This is behavioral coaching.

For years, many advisors have dismissed the behavioral work as soft and not measurable. Recent research by Vanguard in their Alpha Advisor report states that behavioral coaching is worth 150 basis points a year. Lets say you have average AUM of $1m per client, this is $15,000 per client. This level of value is too big to ignore. This is predicated on the basis that the value of an advisor is 300 basis points and behavioral coaching is worth 50%. Other research studies from Dalbar would support these conclusions.

I encourage you to read the Vanguard research and do a review of your value proposition. Will it change how you present your services and the types of tools you will use to reinvent yourself as the behavioral coach of the client? You can access the Vanguard research at the following link Advisers Alpha: Putting a value on your value.


Using Behavioral Intelligence to Navigate Couple Differences

Let’s examine the client experience in your financial services practice. Who is the first person I would come in contact with at your firm? Are they trained in the behavioral intelligence of your clients? Do they even have the data in your CRM so they can easily remind themselves how to adjust their style to accommodate your clients? Or, are you assuming they know how to deal with every client…especially in a crisis?

The “challenges” of the financial services industry come in the form of market corrections, death of a spouse/family member, health challenges and even the birth of a baby. Each client is different and that is especially true of partners in a couple.

As an advisor, it is important to have a defined process that actively and uniquely engages each client/partners in the decisions that will affect their financial life. And that starts with the receptionist to the client service staff and to every client facing staff in your office.

Empower your staff with the behavioral intelligence that will make a difference. That way you can honestly say, “We can’t control the markets, but we can manage and create your experience.”

Leon Morales and Peggy Mengel are both Vice Presidents, Human Behavior Solutions at DNA Behavior

Specializing in financial services, Leon and Peggy use behavioral intelligence to help businesses navigate human differences to unlock performance potential. DNA Behavior helps grow behaviorally smart businesses and financial advisors worldwide to increase competitive advantage using the most reliable behavioral discovery and performance development systems on cutting-edge technology platforms.

Visit the Financial DNA website to learn more. |Try Financial DNA Free for 30 days!



Poor Communication Causes Advisors to Repeatedly Lose Clients

The phenomenon of endless blogs and studies addressing this topic serves only to complicate what is in fact a simple issue. It’s not just the financial services industry that loses clients through poor communication – it can happen across all service providers.

So, are clients petulant and easily seduced away to another provider? Well maybe, but the financial services industry is different in that it deals with money, which is an area of life that is somewhat sacrosanct ? almost as sensitive as the relationship with a doctor. There will always be some clients who are chasing a better return. Those clients are hard to retain at any time. However, given money is such an emotive issue a much greater retention effort should be made with the majority of clients who want to build a trusted long-term relationship.

I listen to many people involved in the financial services industry and they seem to have a technical and results based language all of their own. There seems to be little or no emotionally engaging conversation which is customized to each client. One almost feels like calling out ‘talk to me’ as a human being who has goals, desires and family issues.

poor comm

Talking to clients about their finances should be seen as a privilege. Every conversation should require the advisor to stop and consider their role in their client’s world. These conversations cannot be ‘one style fits all.’ Conversations need to be based on getting the mix right between investment, financial and personal topics. Knowing how to speak to your different clients and understanding them on a real and tangible level will deliver long-term sustained relationships.

The blind spot for most financial advisors is that they do not really know the communication needs of their different clients to be able to properly engage with them on their unique terms. Further, they do not sufficiently know the financial personality of their clients and how that will be motivating them and driving their biases. This needs to be addressed in decision-making conversations.

The following independent research statistics speak for themselves. Knowing how to communicate and engage with clients is the road to retention.


Lack of communication is one of the top reasons investor clients fire their advisors. Clients do not necessarily need to know if they are up 3% on the market, but they do want to know if they are on track to meet their financial goals. George Tamer, director of institutional sales at TD Ameritrade Institutional



Every client and advisor will have a unique communication style based on their natural behavioral DNA. To be able to develop more effective relationships with clients, advisors need to know how to understand their own and their client’s communication style.

Comm Style3

Communication is not just about whether the client wants an email, phone call or meeting, it is also about how each communication interaction is framed. This comes down to setting, tone, use of words (such as goals versus family stability or spending versus savings), empathy, graphics and detail.

To put it simply, every client will approach the first meeting wearing a mask (metaphorically speaking). Advisors who up-front have the behavioral insight to understand how to communicate with the client on their terms will be able to discover what’s behind the mask. Therefore, they will be able to more quickly take the first step to building trust with the client.

Discovering each client’s unique connection to their money at a deeper level will deliver insight that helps you to provide life-time recommendations. Through understanding a client’s communication style you will be better placed to help the client more confidently make key decisions when they are under pressure in market volatility or facing life transition events. Imagine, if you had the framework available at your fingertips to know exactly what to say to each of your clients in review meetings and phone calls if the market went downwards 8% during a quarter?

You will understand hot spots that might surface if your communication style is markedly different to theirs and know how to navigate them safely. You will be better able to separate your own emotions and bias from the client’s actions and decisions.

Finally, understanding communication will enable you as the advisor to have open and meaningful conversations that not only place the client at ease around the sensitive topic of money but will also help you to more confidently and wisely advise your clients to make better decisions at all times.




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clients perspective case deeper discovery

A Client’s Perspective: The Case for Deeper Discovery

Since most advisors have no way of knowing why their client is behaving they way they do, they will pick an interpretation—because that’s what our brains do.

The way we see one another can be irrational, incomplete and inflexible—and largely automatic. And it is a two-way street: both from an advisor’s and a client’s perspective.

Mike has been a successful wholesaler in the Financial Services industry for over 15 years. He had assembled a solid portfolio that he felt was well diversified and positioned for his future goals. But things changed after he was married for a few years. His wife, Abby, started asking him questions about their investments and Mike felt a bit attacked. Additionally, he found himself answering most of her questions with “That’s just the way it is” or “You’ll just have to trust me because I can’t explain it to your required level of detail.”

You might imagine that didn’t go over very well with Abby. Mike had to come to terms with admitting that his expertise in this industry did not incorporate every aspect of the financial planning process that his clients (financial advisors) dealt with on a daily basis: cash flow projections, creating objective portfolios and LTC insurance. He realized it was time to hire a financial advisor.

While Mike had a short list of names, Abby had a healthy skepticism of most financial professionals.

Their initial interviews were quite interesting. The technical competence of an advisor was fairly easy to ascertain. They could tell whether an advisor was intelligent, skilled and effective.

What was far more difficult to know about an advisor was how they would understand them at a deeper level. As Abby said, “We have to be able to connect with this advisor”. The advisor Mike and Abby selected used a combination of an objective profile and reflective questions. They could tell he would be able to navigate their differences very effectively and keep each of them happy in their own way!

In retrospect, what surprised Mike the most was that the financial selection process of their financial advisor was based completely on trust. Both Abby and Mike trusted this advisor to create a unique plan and manage their hard earned money to reach their goals. And to have honest and direct conversations at their annual reviews to be sure they continued on track without unknowingly derailing their efforts.

Over the ten years of working with this advisor and his team, they have never been disappointed. Each team member has a different personality and area of expertise and addresses both Mike and Abby in a unique way.

With Mike, it’s a combination of light-hearted fun and getting to the bottom line of progressing towards our goals. For Abby, it is about fun and family but equally important are the details and market overviews. Now Mike can rest easy knowing that she is happy getting all that information and he does not have to be accountable for any answers.

There are many reasons to hire a financial advisor. As this couple demonstrated, it was about finding the person whom they could trust to successfully navigate their differences.

Technical competence is a “check-box” item in today’s world. Digging deep beneath the surface is what most clients really want from their trusted advisors.

Are you prepared for this deeper discovery journey with your clients?

is your client susceptible

Is Your Client Susceptible?

You spend a lot of time developing a trusting relationship so you can create a customized portfolio and financial plan for your clients. But it could all unravel in the blink of an eye!

There are three often over-looked financial personality factors at play with each of your clients and these are often hidden deep beneath the surface:

  • Emotionally driven
  • Determination
  • Desire to spend

How do you know which of your clients is more susceptible to the financial talk shows, the evening news or the negative financial headlines in newspapers and magazines? Some of your clients are more easily “dragged down” by this negativity and actually start believing it! Others can look at a headline or “sound byte”, not read much of the article but come to their own inaccurate conclusion.

Now imagine a couple arriving together for their first annual review with you. The one is extremely concerned that the markets are fluctuating a lot. And, since it is so close to retirement he worries that if you continue with the portfolio you have designed it will mean major cutbacks in lifestyle spending. The other feels comfortable with the portfolio but she is concerned about your fee structure given all the recent press on advisors charging too much and damaging returns on retirement plans.

Of course, prior to your meeting, you don’t know any of this is happening with your clients. So you have to spend your time “re-selling” this couple on your strategy so they don’t loose faith in you or the commitment to the plan.

What if you could identify in the on boarding meeting with your clients those that are more emotional or whether they are attracted to the headlines? Your entire approach would change to be more client centered to engage that client on their terms.

Your staff could produce a list of those clients who were more emotionally affected by market swings so a quick phone call from you would be the perfect strategy. Perhaps your newsletter could be tailored to headlines and bullet points to get more clients to read it. Most importantly, you could prepare for your annual meetings knowing in advance the emotional state of your clients.

Don’t react. Be proactive and become a behaviorally smart advisor to build trusting relationships that will keep your “susceptible” clients engaged for life.