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Identity Conversation with Hugh – Behavioral Design Influencer

Whenever I think of a behavioral design influencer, my dear friend Deborah De Jong always comes to mind. With a passion for interior design, she took interest in human behavior early on in her career.

Deborah is a renowned interior designer, TV personality, business consultant, and the Founder and CEO of Emmanuel One Pty Ltd. We’ve known each other for 19 years, nearly since the start of my journey in human behavior.

Joining me from Sydney, Australia, in this Identity Conversation, we discuss the way she utilizes behavioral science to create a design plan that matches her clients’ personalities.

Your Firm Isn’t Ready for ESG – Prove Me Wrong

For years, the DNA team has been writing about how the world is moving to a place where everything is hyper-personalized for every customer in every interaction. Lately, firms have been approaching us for the most personalized investment service we have seen, ESG investing. Are we finally here? Is everything personalized yet? I think not.

Firstly, I love the personalized approach to ESG investing. The ability to customize services at scale and deliver unique investment experiences to each client will be beautiful. However, in my opinion, FIs are starting to segment clients in the wrong way. Most firms are focused on segmenting clients into ESG buckets before they really know them.

Does your firm know how each of your clients communicates? Make decisions? Learns? Gives? Evaluate investment performance? If you are relying on your advice team to know and remember each unique client, good luck. Better luck if you have high turnover or there are poor notes in your CRM.

Working in behavioral science for the last decade, I know the data demonstrates that each person is unique (seriously, there are 4 trillion possible combinations in Financial DNA). And from being a millennial, I know that each of my peers wants to be treated as they are unique. Is your firm really ready for this? Does your firm really have the ability to treat each person as unique?

A 3-Dimensional challenge for your firm, are you ready?

ESG investing adds a 3rd dimension to the investing picture. While we currently operate on 2 dimensions, most firms only do 1 of those well. The 3 dimensions: First, there is the obvious investing dimension (dealing with the performance and investment vehicles themselves)… most firms do this well. Second, there’s a human dimension (dealing with the market impulses of clients, building engagement with the FI or advisor, addressing client communication needs, and decision-making habits)… most firms do this poorly. Now, firms are adding this ESG investing dimension (layering on the environmental, social, and often times political values and beliefs to their investments.

I will explain this further with my two friends, Kelly and Mike.

Dimension 1: Investments
From an investment picture, Kelly and Mike bring equal parts to the table but have little investing experience, except their 401ks. Kelly recently had a windfall from her inheritance and Mike cashed out equity from the IPO at his company. Both plan to work until their mid-60s, so they have about 25 years left to generate wealth.

Dimension 2: The human dimension

Californian, born and raised. Kelly’s stickers on her Prius could tell anyone what she believes in and the causes she supports. You better believe she composts everything and even carbon offsets her vacations. Sound like someone you’d hang out with? Well, Kelly and I have many things in common, one of which is we are both cautious. As a third-party to Kelly, I see this everywhere. Her caution in her career, her clothes, and even in her 2011 car. She accounts for every dollar she earns and is perfectly content with living in her modest 2 bedroom, single-family home with Mike for the long haul.

As luck would have it, opposites attracted Kelly to her husband, Mike. While Mike and Kelly share many views on life, their values, and their love for the environment, they couldn’t be any more different from a behavioral perspective. Mike loves his Tesla, but in contrast to Kelly, primarily because of the 0-60 speed. Mike works in SAAS sales, not for the love for tech, but for the challenge. Mike seems to be in his prime at the end of the quarter where he is below his quota and the pressure is on. Mike loves taking risks for the reward.

Working at DNA, all of us get our own friends and family accounts, and believe me, they get used! Like all of my friends, I forced Kelly and Mike to take their Financial DNA discovery. Kelly is an Adapter, 15/100 risk profile, and a Group 2 “Ultra-Conservative” investor. Mike is an Influencer, 87/100 risk profile, and a Group 7- “Aggressive” investor.

Dimension 3: The ESG Dimension

Kelly and Mike both have a love for the environment. Kelly more so than Mike, but nonetheless, they have both agreed to do everything physically and financially possible in order to make a positive impact on climate change. From a financial perspective, can your firm manage this complex, 3-dimensional ESG scenario? The reality is, Kelly would be best suited to invest in stable (but eco-friendly) investments while Mike will be constantly benchmarking their portfolio against the S&P 500, looking for a win. How would you manage this situation?

From my behavioral finance lens, many firms are not ready to deal with the complexities of this third dimension, because they haven’t mastered the human element yet. Firms are trying to tackle a one-size-fits-most approach with ESG. The reality is that all clients are different, but most firms lack the behavioral finance data to tell them apart.

Prove me wrong. I’d love to hear how you would behaviorally manage Kelly and Mike and deliver them an ESG portfolio.

A Fresh Look at Wisdom and the Way Forward

– First Published on Nasdaq –

In the midst of the pandemic, and particularly with vaccines and a new year on the way, we’re all more reflective. A direct benefit of such reflection is a willingness to change and reinvent. Where are you in this process?

As I continue my quality life journey – after all, isn’t that what we’re all on? – I’m reminded that, even with the best intentions, having the wisdom to make good decisions is foundational. Those decisions may be about life purpose, finances, relationships or…?

To wit, Plato believed that wisdom was theoretical or abstract. Aristotle, his pupil, disagreed, saying that wisdom was a kind of moral compass that guides our thinking and behavior. Whatever philosopher(s) you follow, there is no doubt gaining wisdom is worth pursuing.

How else can we make the best decisions for our lives, yet reflect on the theories, wisdom and experience of others and see what that might spark in ourselves?

Parsing and deploying wisdom

Central to my continuing pursuit of a quality life: I understand the importance of applying wisdom to the financial and life decisions I make. You might say that’s one of my superpowers that comes from the natural DNA behavior of being extremely rational. That’s coupled with the ability to quickly turn vision into practical reality and being able to easily make sense of messy situations and complicated information. We all have a superpower; it just varies individually.

And, knowing that I am goal-driven, that I will revel in complex challenges and that I will take initiative, it was important for me to understand and measure my level of wisdom. Yes, there are behavioral science tools that enable such measurement.

This measurable wisdom didn’t come without being self-aware, researching, surrounding myself with quality thought leaders and investing in educating myself. While I am inherently wise, I also know the importance of gaining knowledge and applying it judiciously.

As a single man, wisdom in making decisions was never an issue. What changed was becoming a family man, as the needs of others had to be built into my thinking. This is a good lesson for all: Your foundational behaviors do not change, but factors around them do and must be accounted for.

This Family Phase of life is when I began to understand the differences of practical wisdom. That is, knowing the right thing to do in a particular circumstance through understanding that particular circumstance, knowing what matters, and effectively reasoning to bring about what matters. The means to an end.

Practical versus theoretical

Theoretical wisdom is knowledge of things that don’t change. (Akin to unchanging innate behavior, which I talk about a lot because it is at the core of my work.) Then there are ethics – about what is really right and wrong…what is living well and living badly, as stated well in “Key Concepts in Practical Philosophy,” by David Arnaud and Tim LeBon.

Financial decision-making was my first real entry into the whole area of wisdom and decision-making. As a young man I was constantly confused by financial advisors who thought they understood me sufficiently to push investment opportunities my way. I never recall having a conversation about my life goals or reasons for wealth creation.

Their insight must have hinged – or so they thought – on generic or theoretical wisdom, because it certainly was not specific to me, the client.

So, began my (life and career) journey into understanding the importance of gaining wisdom through self-awareness, knowledge, experience and recognizing that I had, for example, a built-in, very high tolerance for financial market movements. And tolerance and resiliency around extreme life and business changes.

Put another way, I can quickly see changes coming and innately know what to do to position myself for the future. Also, with experience and with a rationale mind, I have learned to look at patterns of situations and the messages flowing out of them to discern what to do next. And the vision to synchronize and share that insight with others who needed to understand me in order to work with or advise me.

It became clear to me as I moved through life that wealth creation needed to have a purpose. Family security was obviously at the top of the list, but equally important was a quality life focus. THAT is the difference between theoretical and practical wisdom.

Wisdom, goals & wealth creation

The pandemic has clearly redefined direction for many people, and I’m no exception. Remote working has not harmed my business and the same can be said of many of our clients. Of course, like many others, I have had to invest in additional technology to make communication more effective, but in truth I – with my team – have continued to strategize and run and grow our global business (predominantly online).

In fact, over the last 8 or so years we had been moving the business to a virtual environment so we could be flexible and nimble, knowing that the world had become increasingly dynamic with fundamental business changes taking place every 2 years. The intuitive sense to do this could be said to be innate wisdom at work driven by rationality.

So, where does wisdom fit in this quality life scenario? For me, information alone is not wisdom. I believe wisdom is found in our own insight and the ability to piece together multiple bits of information to build a clearer picture. If nothing else, this period of being on lockdown has enabled many to rethink the life and lifestyle they have been leading.

Many of my friends and colleagues are reflecting on insights they’ve had. Often this is a reflection of ideas, life directions, goals and direction(s) they had in their youth. This fresh awakening of wisdom – and questioning the quality direction of their lives – is providing answers for the here and now.

And, yes, all of this can and should lead to conversations with financial advisors. Why? Wealth creation decisions are – and should be – made around life goals. And life goals are not the same for every person or even for the same people at different stages.

What role wisdom as life realigns?

If we’ve survived with remote working, can/should this approach continue? As our own opportunities increase, who can we help? Where can we make a difference? Who needs to be brought alongside us and coached?

All these thoughts have come not just from coping with a global virus but from knowing the importance of applying wisdom to our quality of life going into the future.

How will you calibrate your wisdom and sync such with quality life goals? In turn, how will you enable that to drive your work with and on behalf of clients, all the while helping them discover their balance for wisdom-quality life-financial decision-making?

Don’t Reinvent Tech; Add Behavioral Power

– First Published on Nasdaq –

People are complicated. Some tell you their life story in the first few minutes. Others take time – and deep questioning – to reveal even the smallest details.

Financial advisors know that, around the emotional subject of money, gaining insight into clients’ financial personality is hard. But it doesn’t need to be. No matter how complicated – and different – each person is.

Knowing your clients at a deeper level and having real-time access to innate client behaviors and decision-making inclinations puts advisors in a powerful stance. Ready to deliver top-flight service – and results.

How will a client react to market movements? What are their biases? How do they consider and deal with risk? And what are their spending habits? Clients can tell you about themselves, and you can subjectively observe, but what if you had validated, objective client data built into systems on which you rely?

You’ve got tech; add #behaviortech

The solution is part of the move toward greater use of behavioral science. Financial advisors (and their clients) are coming to the realization that bona fide behavioral insights improve the effectiveness of financial advice – communication, service quality and outcomes.

Layering a behavioral data-gathering addition into your existing tech stack is easier than you may think. Hint: You don’t have to reinvent the wheel. Even if you don’t know what an API is, for instance, your IT people do. Imagine: A plug-in that adds behavioral info to the tech you already have.

This addition makes it possible for financial advisors to identify, engage and deliver client solutions in real time, leveraging data that informs financial planning from end to end. A behavioral tech stack combines customer engagement technology and behavioral insight data to inform client engagement. It enables the knowing-me-knowing-you element that creates trust from openness and transparency.

Plugging in personality

Client data collected through a quick, simple behavioral discovery informs the advisory process in significant ways:

  • Defining financial personality.
  • Advisor/client matching.
  • Individual client financial journey needs.
  • Quality life goal analytics.
  • Real-time access to client behavior data.
  • Client engagement via more effective communication.
  • Insights to inform marketing.
  • Eliminates information silos between client support teams.

Every financial advisor should have access to interactive business intelligence tools. And that includes but goes far beyond client EQ, to include a full range of behavioral insights. (In some cases, as many as 500-plus such insights.) That’s the power of modifying your tech stack to include the behavior module.

Be(havior) on the cutting edge

Imagine: In advance of every client meeting, whether face to face, on social media, conferencing platforms or the phone, an advisor could, at the click of a button, be able to deploy dashboards and personalized information to respond to specific client wants and needs. (Even wants and needs they may not know they have or cannot verbalize; again, you’ll be tapping into innate behavioral info.)

Best: The behavioral tech stack is so integrated into other advisor systems and platforms that client info and prompts appear as needed, with the advisor not even having to push that proverbial button. As an example, a pop-up might remind you the client you’re about to meet with has difficultly following set procedures and offers a checklist of ways you can simplify processes to ensure they stay on track.

This approach creates an experience tailored to individual client needs. Moreover, it’s the way of the future.

Using A Behavioral Science Tech Stack in Investment Committee Decision-Making

This article first appeared in Nasdaq

Most investment committees have a clear mission: Serve as stewards for assets of the organization they represent.

The committee must develop an investment plan according to the financial needs and circumstances of the corporation. So, if the primary role is to approve the fund’s investment objectives, how then do you ensure members of the committee have the appropriate behaviors to fulfill their role without bias?

The answer may lie in using your tech stack to power the investment committee – and its workflow.

Your next-gen investment committee

Recruiting the right people to this critical role – including having in-depth knowledge of their decision-making abilities – makes the difference between the success and failure of the investment committee.

But how do we define that fit-for-role? Is it a professional background? Education? Investment knowledge? And where does the diversity lens come in? (Or is it missing?) What about committee members’ inherent risk tolerance and behavioral bias toward investments?

Research demonstrates there are definite biases (both investment behavioral biases and workplace behavioral style differences biases) that should be considered when forming a committee with such weighty organizational responsibilities. Therefore it is increasingly important to know the inherent decision-making behavior and bias of each individual and how, in a diverse group, these differences will be managed.

Add this to your tech stack

As is the case with all critical appointments, the key lies not with their education qualifications, experience or talents, but with their ultimate behavior. What innate behaviors do they have – of which they may not even be aware – that will influence decision-making, especially financial decisions and/or those made during crisis?

Without the use of a validated behavioral profiling system of some sort, selecting individuals for an important function like an investment committee becomes little more than a lottery. And those are some weighty decisions to leave to chance.

Some financial leaders may not want to hear that their own perspective and powers of discernment may not be the only tools needed. Still, leaders committed to building the tightest, most reliable and trustworthy investment committee will want to introduce a behavioral finance (BeFi) tech tool that hones team member selection for the best possible fit and outcomes.

And why not? Tech is now an accepted part of so many aspects of financial processes, including throughout and across the investment community. In this case it is not usurping the wisdom, judgment and experience of leadership, but supplementing and heightening it by making key insights about potential committee members easier to access.

Financial planning and wealth management organizations are now investing in their value tech stack for everything from market insights and model portfolio construction to manager selection, cybersecurity and, yes, BeFi; so, using behavioral science (BeSci) to create a diverse investment committee should be welcomed, not daunting.

Behavioral diversity and better outcomes

Remember that diversity of opinion – about potential committee members and among committee members (once selected) – may not just come in the form of understanding different behaviors, bias and decision-making styles, but in experience, given that not every member of an investment committee has to be a financial expert. What is important is that members should have a wide set of perspectives and a willingness to be collaborative and open.

That’s why a depth of insight into the individuals to understand their decision-making approach and their likely response under pressure is crucial. Without such, important investment decisions will be flawed.

Selecting a BeSci expert, whether internal or external, to guide the committee using a behavioral discovery process can add a dimension of diversity to the investment committee by ensuring the group can function collaboratively and effectively while also preventing group think and other pitfalls you – and the committee – may not even know they were experiencing.