Before
I jump into this product announcement, I would like you to know that we planned
this launch months ago, long before there were hints of our current market
disruption. While Market Mood does aid in managing client’s fears in volatile
markets, our intention is not to attempt to capitalize on these difficult times
or the concerns of investors. Stories are starting to come in from the DNA
community members around the world about these trying times and we are seeing
the fear and emotions that DNA measures, come to life. The fear and emotions that investors are
experiencing is real and it would be a disservice for us to make these times an
opportunity for DNA. For this reason, if you feel that this tool will help your
firm or aid in your ability to manage your client’s fears – we will work with
you however we can by providing trials or waiving steps or fees to simplify the
onboarding and get you started.
Our
team at DNA Behavior released a new behavioral finance API endpoint called the
Market MoodTM API to help financial services firms measure clients’
market fear or exuberance. This Fintech tool arms them with data to
behaviorally manage clients during times of market volatility.
While
financial advisors have been using Market Mood since 2015, the API provides a
flexible, relatively quick way for firms large and small to scale this
solution.
Stopping
Clients From Making Financial Mistakes
The Market
Mood API measures the current level of market fear or exuberance for each
investor. It also provides easy-to-understand behavioral management tips and
action items for investment advisors (and Fintech applications) to behaviorally
manage or “nudge” their clients, in a way that is tailored to each
client via automated customization.
Research
affirms that investment advisors bring the most value to clients by stopping
them from making impulsive decisions that change investment positions at the
wrong time. Our own research tells us that, in typical market conditions, using
Market Mood can help advisors bring an additional 150 bps to investors;
however, in adverse volatility, this can increase to higher amounts.
Like all DNA Behavior tools, Market Mood helps individuals easily (and practically) apply behavior to create customized experiences. In this case, advisors & Fintech apps customize the experience for investors, easily using behavioral finance nudging techniques (traditionally only addressed in advanced textbooks and research papers).
Investor
clients typically have one of two reactions to market events. A reaction to
market news they hear regarding movements of a particular index, such as the
S&P 500, and a reaction when they see their actual portfolio in their investment
app. With the Market Mood API, we help firms measure both reactions; the API
measures client-specific Moods as well as Moods powered by market indices.
Nearly
Each Clients Will Have a Different Reaction to the Same Market Event
It’s
logical that clients will react differently to the same market events, but
traditionally, firms and advisors treat each client the same when markets are
volatile. With recent market shifts caused by events such as the China trade
talks, Brexit, and now the coronavirus outbreak, some investors are
opportunistic when the markets are down, and others are fearful.
In
sharing his experience, Shay Woodward of Performance
Wealth says that, “Market Mood is a new way of thinking about and looking
at my DNA Client Data and how clients will react to the stock market. The
communication cues and tips provide a structured approach to engaging with my
clients. I continue to find better ways to engage with my clients using Market
Mood.”
Market
Moods Clients May Have
There
are eight different Market Moods, represented with four colors to easily
demonstrate the level of urgency for financial services teams.
Market Moods, when
investment returns are positive:
- Comfortable
- Exuberant
- Watchful
- Apprehensive
Market Moods, when
investment returns are negative:
- Comfortable
- Opportunistic
- Concerned
- Fearful
Learn more about Market Mood: Download the Market Mood Brochure
Market Mood API Documentation