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The Outgoing People Connector

This post is part 4 of our 10 part series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 4: The Outgoing People Connector

Helen Jones is a 38-year-old mother of 3 children who has a very bubbly, outgoing personality and an active social and community life. Helen openly admits that she has gone to lunch and dinner parties and hears the latest hot tips on what stocks are going up. Often in the excitement of the moment Helen has taken a few bets. She justifies to herself that it will fund a vacation, or this will mean she can have some nicer clothes. However, after a few years of much heavier losses than gains, and the future of her family on the line, Helen realizes something is wrong. Outside help is needed.

Behavioral Insight
Naturally expressive and talkative people will be Engagers who are Outgoing People Connectors. They are able to network with people well but may make uneducated bets from following the herd that sabotage their portfolio.

Communication key: Tell them the names of the people who are involved in the company and management of the investment.

Helen is clearly an Engager with the dominant trait of being an Outgoing People Connector. This means she is constantly networking with others and always exposed to the latest idea or solution.? The Outgoing People Connector will usually be the expressive and talkative type who enjoys mixing with people.

When these networking talents are used well the Engager who is an Outgoing People Connector will learn of some great ideas. The key will be using the ideas wisely. However, often this type of person is quite impressionable regarding what others have to say and will display a herd mentality. We all know that there are people who pick up the latest money-making idea at a dinner party. Everyone else is jumping into a deal; why shouldnt I? Or one of their friends is talking about a hot stock tip.

Further, a struggle for these Engagers who are Outgoing People Connectors is that they are often quite emotionally vulnerable, and they have a desire for instant gratification. So this leads to impulsive decision-making and later regret. While they create the perception of being risk takers, very often they are not. Usually, the quick leap into an investment is matched by a quick leap out with great wealth destruction consequences.

An advisor who is an Engager with the primary trait of being an Outgoing People Connector will be naturally strong at finding out from others what the new opportunities are. However, they need to restrain themselves and only present these opportunities to clients when they have thoroughly researched them. Otherwise, their clients will each have a portfolio with a mix of poor investments.

Learning Point:
The advisor needs to be aware that the Engager who is an Outgoing People Connector will be responding to a lot of up and down emotions with every investment opportunity, and therefore each one needs to be discussed so that wise decisions are made. Ask the client: Tell me who you consult with to get investment ideas? How do you check the opportunities that are presented to you and who is presenting them?

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

The advisor needs to be aware that the Engager who is an Outgoing People Connector will be responding to a lot of up and down emotions with every investment opportunity, and therefore each one needs to be discussed so that wise decisions are made. Ask the client: Tell me who you consult with tNaturally expressive and talkative people will be Engagers who are Outgoing People Connectors. They are able to network with people well but may make uneducated bets from following the herd that sabotage their portfolio.
Communication key: Tell them the names of the people who are involved in the company and management of the investment.
o get investment ideas? How do you check the opportunities that are presented to you and who is presenting them?

The Take-Charge Visionary

This post is part one of our series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

The Take-Charge Visionary

Behavioral Insight 3, Take charge investors, investor behaviorJack Sun is a 40-year-old driven businessman who has come to meet with you to discuss his finances. You have learned that Jack has just sold one of his businesses and he now has capital to re-invest. You ask Jack the question: What will your life be like in 3, 5 or 20 years? Jack is able to immediately respond that he loves running restaurants and managing people. As the discussion goes on it becomes obvious Jack has worked out his life plan and he will not be retiring. Further, he does not mind what he invests his investment capital in so long as it makes money. He says he is interested in the overall return and not the performance of any particular asset.

Jack is an Initiator with a dominant trait of being a Take-Charge Visionary. This means he is naturally a big-picture thinker. He can see his life out a long way. Being able to more easily get the big-picture clarity does mean he will be naturally more comfortable making long term investment plans. Further, this clarity will help Jack with being able to more confidently make financial choices.

Also, when it comes to managing investments, an Initiator with Take-Charge Visionary traits will be able to more easily look at their investment portfolio in the aggregate. This will generally help them focus on the overall result and not get stuck on looking at whether each particular investment is a winner or loser.

Behavioral Insight
Naturally big-picture thinkers and decisive people will be Initiators who are Take-Charge Visionaries. They know where they are going and will have a consolidated view of their investment portfolio.

Communication key: Keep the discussion high level and provide options on recommendations.

A struggle that an Initiator will have is listening to advice from an advisor because it is about their agenda and plans. This means they could miss learning important information before making a decision and over extend themself.

An advisor who is an Initiator with Take-Charge Visionary traits will be naturally good at giving the client direction but needs to slow it down and listen to what their client has to say. This type of advisor needs to be very careful that their dominant attitudes do not overly influence the portfolio.

Learning Point:
The Initiator with a Take-Charge Visionary dominant trait will more independently set the direction of their overall planning. The advisor should aim to guide them by providing options and recommendations on investment choices. Ask the client: What goals would be the most important for you to achieve in your life? Have you built a detailed plan for your wealth creation?

To read about additional client behavioral styles, download the full Financial Performance in the New Behavioral Economy White Paper.

What are your thoughts?

The Fast-Paced Realist

This post is part 5 of our 10 part series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 5: The Fast-Paced Realist

Max is a 62-year-old senior corporate executive who is used to making difficult decisions. Some colleagues call him Merciless Max for his ruthlessness about numbers. His view is that forecasts have to be met every quarter and a bottom line number delivered. Predictably, Max believes that the same approach should be adopted with his investments. He looks at the portfolio quarterly and makes the tough decisions that are needed to keep the portfolio in line. He calls this re-balancing. At times, however, his rational focus may mean a short-term swing is mistaken for a long pattern, and therefore too much pruning goes on.Client Behavior, White Paper, Financial Planning Performance

Behavioral Insight
A naturally logical and challenging person will be a Fast Paced Realist who is able to make very rational decisions without getting stuck but may be too impatient for returns.
Communication key: Provide the bottom line results and keep the discussion quick.

Max is your classic Fast-Paced Realist who generally knows when to sell winners and cut his losses. Fast Paced Realists do not have an aversion to taking losses. They are rational enough to see that at times selling losers instead of winners needs to happen even if it is embarrassing or causes short-term pain. They will act decisively and move on without getting too emotional when making hard decisions. Further, unless they have been misled by an advisor, Fast-Paced Realists will generally take responsibility for their decisions and not act like they have been burned because it has all gone wrong.

The struggle for the Fast Paced Realist is that their more aggressive results focused nature can lead them to heavily trading the investment account. Also, their natural lack patience may cause them to sell investments too fast because of a market blip. Therefore, the risk is they may sacrifice what is a good long-term investment for short-term results.

An advisor who is a Fast-Paced Realist has the logical strength of being able to help their client make rational decisions. Although, the struggle will be that whilst providing the rationality they may not recognize the clients feelings about the situation and the decisions to be made. Further, advisors who are Fast?Paced Realists would also be more likely by nature to over trade or churn their clients investments.

Learning Point:

Fast-Paced Realists need an advisor to help them with re-balancing their portfolio on a regular basis to maintain diversification, and in doing so show them the long-term investment fundamentals before short-term decisions get made. Ask the client: How do you approach making difficult investment decisions? What type of performance are you expecting on your investments?

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

 

Framing: Re-frame the Presentation of Ideas and Suitable Solutions

This post is part 2 of our 10 part series on Financial Behavioral Insights from our Financial Performance in the New Behavioral Economy White Paper. The financial behavior insights will help you gain greater self-awareness for recognizing some of your own behavioral tendencies and also those of investors.

Behavioral Insight 2:? Framing

Chris, a financial advisor, has invited 20 clients with similar levels of wealth and age to his office for a lunch and learn presentation by Paul Southwick on a new investment strategy. The new strategy is to provide a mix of dividends and capital growth with some downside protection. Chris has vetted the investment and believes it will fit his clients well. Paul uses a PowerPoint presentation with great content in it about the bottom line of the investment and is an articulate presenter. As he goes through the presentation there are clearly some who get it and want to sign up, there are others who are totally confused by the details and switched off, others who want to do more research and some who need to understand how it meets their security needs. After the lunch Chris is very concerned about the mixed reaction and losing client trust. He knows the product is sound and he will invest personally.

Behavioral Insight
The difference between what the advisor said and what the client heard will be attributable to the behavioral lens of each. The communication of products and solutions must be adapted.

Framing, financial advisor, customizing the message, customized experience, client engagementHave you ever attended a presentation like the one Chris arranged and been de-energized, bamboozled and confused by the investment proposal and not responded? Understanding investors learning styles and propensities for receiving information, new ideas, strategies, products and solutions is critical to successfully presenting to them. This will increase the chance that they understand the proposal for what it is and how it is relevant to them.? The mistake many advisors and fund managers make is that they naturally present to investors through their own lens. Instead, they should be re-framing how they present to be much more on the investors unique terms.

Advisors need to appreciate that with 20 people in the room there could be 20 different reactions, because each person is unique. The best way to get around this is to re-structure the proposal being presented into 4 quadrants so that each broad category of behavioral needs is addressed: 1. The big picture and how it relates to achieving goals and bottom-line returns, 2. Indicate how their lifestyle needs are met along with telling them the names of the people involved in managing the product or solution, 3. Address financial security and provide feelings, 4. Make the solution tangible and provide the history and research details.

Learning Point:
Advisors need to use behavioral insights to customize their communication with clients and to re-frame the presentation of ideas and suitable solutions so the client interprets the information as intended.

What are your thoughts? For additional information on discovery through behavioral profiles, click here.

Advisors Can Differentiate By Integrating Behavioral Finance Strategies

Recently, Merrill Lynch and Capgemini have issued a very important research study which demonstrates how much investors confidence has been eroded by the turbulent markets. Investors are still very wary of the future.? Click Here to read the article.
The article points out that the following:

  1. Investors want a more active relationship with their advisors, including a deeper understanding of their investments and how they are aligned to their goals, based on their actual risk profile.
  2. Many investors are being driven by their emotions when making investment decisions which is increasing the need for advisors to engage in greater dialogue with their clients.
  3. Clients are now demanding fundamental changes in how they are served, and are favoring firms which can understand both their emotional and intellectual needs. This is increasing the need for advisors to incorporate a behavioral finance approach towards portfolio management. Advisors need to be able to incorporate the emotional factors into stronger portfolio management and risk management capabilities. A behavioral finance approach of this nature can be a big differentiator among firms.

This research is very consistent with other research, such as from Gallup, which demonstrates the need to emotionally engage with clients at a much deeper level. This is the new “behavioral economy”.

Superior Client Satisfaction

Superior Client Satisfaction – Delivered by Engagement through Collaboration

The success of every professional services firm is driven by the need to deliver consistently superior client experiences that result in high levels of client satisfaction.

High levels of client satisfaction lead to more dynamic growth rates, greater revenue, profitability, and business valuation, higher employee retention rates and performance and a much more positive business environment.

Professional services firms have undergone a series of major transformations over the past twenty years. In the 1980s, these firms were sales organizations and employees were hired to maximize sales volume and values. For those of us who were involved in business in the 1980s, you will recall some of the approaches we were taught ? overcoming objections, closing the sale, getting the next appointment, accelerating the sales cycle, and how to sell anything to anybody. Most approaches were based on the sales person being pitted against the client and the goal was to close the sale.

The past two decades saw a shift from selling to Collaborative Selling. Changing demographics and consumer attitudes has driven the change from focusing on the sale to focusing on the client’s wants, needs and preferences. Collaborative Selling is a new approach through which a professional utilizes a fact-finding approach to identify problems is followed by a presentation of solutions. Financial advisors present the best investment or wealth management solutions, insurance professionals present the best insurance or risk management solutions, accountants present the best taz planning solutions and estate attorneys present the best estate planning solutions.

The transition from selling to problem solving was really the first step in shifting the focus of the service professional from an adversarial approach to a client-centered approach. Today, some service professionals try to spend time understanding a clients wants, needs and preferences and then attempting to match problems with appropriate solutions. Some professionals are taking this to the next level ? true Collaboration.

Merriam-Websters Dictionary defines collaboration as to work jointly with others or together especially in an intellectual endeavor. True collaboration is established to lead to success for all parties involved. The three R’s of Collaboration – Transparency of Roles, Responsibilities and Rewards must be established and maintained in a collaborative team. Collaborators must completely understand the how to communicate with each other, the hard-wired tendencies, blind spots and learned behavior of fellow collaborators. Frequently professionals collaborate with multiple partners – business partners or spouses and the task becomes more complex. Each collaborator must understand how to best interact with each member of the collaborating team. Next, they must understand the goals, objectives, roles and responsibilities of each participating member.

A main driver of the shift to collaboration is changing demographics. Baby Boomers, who hold many of North Americas major jobs and a high percentage of wealth today, range in age from mid-forties to mid 60s in 2010. During the previous stages (Selling and Problem Solving), wealth was controlled by people born during the depression or during World War II. Baby Boomers are far more educated and knowledgeable than previous generations and have much different learned behavior. Research shows that significant financial events during a person’s childhood, up to the age of 15 years, will have significant lasting impacts on their financial attitudes regardless of the natural behavior. It is natural to assume that the first fifteen years was quite different for people born during a depression or war than those post war children. As a result of their early year experiences, earlier generations tend to abdicate responsibility to “knowledgeable” professionals whereas Baby Boomers tend to delegate and maintain control.

Collaboration is the Baby Boomers preferred style of interacting with professionals and enables both the client and the professional to be fully engaged together in the process. It is important for them to maintain control, work on their terms and to be completely understood by professionals they choose to work with. They are increasingly demanding that professionals collaborate with them to help them make good decisions.

This multi-step process enables professionals to achieve a deep understanding of their clients, wants, needs and preferences and to stage a client experience that will lead to mutual agreement on strategies and solutions. In this emerging model, The business goal isnt merely to delight customers; its to turn them into promoters ? customers who buy more and who actively refer friends and colleagues. (Fred Reichheld, The Ultimate Question ? Driving True Profits and True Growth)

I have been been assisting professional services firms to design winning client experiences and improve client satisfaction rates since 1998 and has teamed with leading international consulting firms to help professional services firms to make the transition to a more modern and effective Client Engagement Business Model delivered by Collaboration.

The Six Stage Client Satisfaction Process is called ENGAGE:

1. E – stablish the professional services team members communication preferences, natural behaviors and success strengths to improve personal and team performance.

2. N – ext open the lines of client communication. Identify client communication preferences to enable client/advisor collaboration and engagement.

3. G – ain agreement and buy-in of clients by discovery of goals, wants, needs and preference. Collaborate to establish a framework for a successful relationship.

4. A – ssess core life motivations and perspectives to establish a risk profile, goal-setting, results and interaction needs to determine how the client and professional can collaborate to make success and financial decisions.

5. G – enerate plans with the client to achieve the outcomes the client requires.

6. E – volve the program with clients as plans are implemented.

The result is the modern client is very satisfied, feels listened to and involved and in turn the professional service firms achieves their objectives of increased revenues and profitability and do so by a fully engaged collaboration process.