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ESG Investing: A Match for Post-Pandemic Outlook

– First Published on Nasdaq –

Interest in ESG investing has risen significantly in recent years. So, what is it?

ESG represents Environmental, Social and (Corporate) Governance factors as a measure of sustainability and social impact of an investment. It’s intended as another “lens” investors and advisors may want to use, alongside, not usurping, financial factors.

For years, ESG issues were a secondary concern for investors. It was often seen as “alternative” or nice to have but not mainstream. Sometimes not even taken seriously. Increasingly, clients are initiating ESG conversations.

One of the reasons may be that ESG investing has been shown to potentially present the greatest opportunity for portfolios. No longer an esoteric offering, financial advisors could well fall behind and lose clients if they fail to identify what issues are important to clients and help them build their portfolio in a way that reflects their values.

Add to that the fact that people have been very reflective during the pandemic; thus, many are beginning to see how various aspects of their lives – including their investments – line up with their values. ESG investments may be one of the answers for which they are searching.

Leverage conversation, technology

Many advisors are accustomed to having conventional conversations with their clients, without knowing those clients at a deeper level. Don’t be tentative or judgmental: Have the conversations to establish if and where clients fit in terms of ESG investing. Some will have base knowledge of the topic; others will appreciate a succinct ESG tutorial.

Advisors may not even realize that some of their clients are already researching companies’ records on environmental sustainability, social responsibility and governance (think transparency and accountability). Other clients may not know ESG investing is not just a nice-to-have approach, but can be a genuine, productive metric of investment potential and returns.

How can technology and data facilitate these conversations? Tech and data provide advisors and analysts with information about companies worthy of investment. It delivers data to advisors based on verified performance, demonstrating that companies worthy of investment are genuinely ESG compliant and are not just one of the in-name-only players.

Better still, tech and data can help advisors and even investors themselves understand the decision-making behaviors of investors. Especially as we come out of pandemic lockdown, in which everyone is increasingly comfortable with remote interactions, advisors need to have behavioral insights at their fingertips. As we all work “leaner,” insights provide an edge for advisors and firms committed to rethink and reshape how they deliver wealth management advice in our rapidly changing world.

Broaching ESG option

The real challenge for many financial advisors is that they aren’t sure how to have ESG conversations with clients. Many might feel asking about a person’s commitment, or not, to environmental and social issues is fraught with landmines. And, if advisors have not done their homework, they could be left flat footed as they genuinely do not know which companies are worthy of ESG investing.

So, how can advisors avoid the potential pitfalls of discussing ESG with clients? Like so many life conversations, such a discussion flows best when each contributor to the exchange understands their inherent behavior. (Again, with tech and data informing both the advisor and client perspectives and their “take” on each other.)

Communication style

An advisor whose style is to converse with authority and who has a strong drive to reach goals and deliver results, may suggest investment opportunities in industries compliant with ESG, where returns are likely to be significant…but they also may fail to “hear” their client.

A colleague recently shared the story of an interaction he had with a former advisor: When the colleague-client noted to his advisor that he did not want to invest in certain types of companies (decidedly not ESG ones and which differed from his core values), the advisor responded, “Well, I guess you are not interested in returns.”

Not only is that untrue of most ESG investments, that kind of response shuts down communication, damages the relationship and likely negatively affects success for both advisor and client. Having tech- and data-driven behavioral insights in hand could have changed the trajectory of things for both client and advisor.

On the flip, a client who is reflective and needs time to research and consider options and who would prefer to invest in a low-return investment but with a business who has a greater commitment to ESG, could feel pressured and withdraw from the conversation. So, again, understanding a client’s innate approach and reactions to stress and money decisions, as well as how they best communicate and are communicated to, could have brought alignment, understanding and, most importantly, productive communication to this scenario.

The time for ESG is now

With “behaviorally smart” tech and data integrated into their other systems, an advisor can, at the touch of a button, have real time information in front of them to understand client behavior, bias, and decision-making and communication style. This enables a higher level of advisor-client compatibility – and that’s the road to success.

Likewise, behavioral data gathering tools deliver practical insights so advisors can understand which clients they have significant behavioral differences with. It also would offer insights into how best to manage the differences. Ex: How and when do I communicate with this client to maximize outcomes for all parties involved?

In all communication exchanges, adapting behavior to relate to another person requires concentrating more on a level of self-awareness. There is no doubt ESG investing is delivering a huge shift in emphasis to financial markets and curious investors.

In a more reflective, post-pandemic world, more investors are looking to be part of global environmental and social solutions, working when they can with organizations that get things right on governance. These investors expect their advisors to be on top of their game in terms of understanding what they the client are trying to achieve. Knowing how to have the corresponding dialogue with them on ESG issues creates a win-win.

Financial services businesses that invest in tech stack solutions that provide tools to support ESG investing will be significantly more successful than their competitors. Not only will they be known for the proactive, positive impact they are having on society, they will undoubtedly enhance their organization’s long-term financial value and build client wealth in line with client wishes and, by nature, the greater good.

Diversity and Inclusion Make Teams Great

Is diversity and inclusion (DEI) in organizations and teams just the latest HR craze? Or maybe just a nod to equality compliance?

Neither. D&I, when introduced appropriately, mines the rich and often untapped talent within an organization. In fact, understanding what D&I means when implemented within a business can be the change that takes an organization from mediocrity to greatness.

Applied to teams, D&I opens doors to innovation, experience, creativity and an unmatched depth of knowledge. But – and it’s a big but – a multifaceted D&I strategy, if not handled appropriately, can lead to chaos and confusion.

The key is to tap into the inherent behaviors and biases of individuals. A highly-validated behavioral discovery process (think a quick-but-thorough assessment tool for every team player) will deliver this insight quickly, accurately and with comprehensive reports that cover every aspect of an individual’s inherent workplace and life behavior.

Such a process provides insight into hidden abilities, revealing behaviors below the surface that, if not managed, might result in disruptive behavior that could unsettle the team. It will highlight communication styles, which helps build a more engaged and productive workforce. Further, the process delivers a culture of openness, mutual respect and trust in the business environment that should satisfy any cultural or legal requirement.

Be mindful that D&I isn’t just about ethnicity, religion, gender, gender identity, sexual orientation, and other such factors; its also about the behaviors that drive performance and reveal (and channel) such behaviors, biases and communication styles to foster successful team outcomes.

Harnessing these differences without the use of a behavioral insight tool can be challenging, if not impossible. People with different backgrounds bring unique information and experiences to tasks. They also bring a significant range of communication styles, decision-making approaches, and thought processes.

In any team, there will be those who passionately and tenaciously bring a vision to completion. Others will be spontaneous, creative and challenge conventional ideas. And there will be those whose experiences and behaviors cross-pollinate, bringing unique perspectives and approaches to work in different functional areas.

Plus, its good business practice to embrace diversity and inclusion: Complex and challenging issues are more likely to be resolved when a team includes a range of talents, thought processes and behaviors.

Dr. David Rock, co-founder of the NeuroLeadership Institute and Summit, and Dr. Heidi Grant, a social psychologist, note in the Harvard Business Review that, striving to increase workplace diversity is not an empty slogan – it is a good business decision. A 2015 McKinsey report on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35 percent more likely to have financial returns above their industry mean, and those in the top quartile for gender diversity were 15 percent more likely to have returns above the industry mean.

Teams formed based on diversity and inclusion that are behaviorally aware, behaviorally smart and which include a range of different skills, are more likely to examine facts, consider a range of options and opinions, and remain objective. They will challenge each other professionally, without causing offense or disconnect. Biases will be openly discussed and resolved. Counterproductive thinking will be constructively argued to find mutually beneficial solutions. All of this leads to more effective decision making and organizational and business improvement.

As an example, Bain and Co. research shows that decision-making effectiveness is 95 percent correlated with financial performance.

Still, diversity and inclusion cannot be a one-off initiative. You should incorporate D&I at the hiring stage, and it’s a continuing work in progress, made more effective by the introduction of tools that reveal hidden behaviors and communication styles. D&I evolves, so your approach should too.?Diversity and inclusion make teams great and inclusion will set your organization apart from your competitors and improve your bottom line.

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.

financial personality

What is Your Crisis Personality? Do You Know?

I was asked this question recently. Fortunately, as a behaviorally smart leader, I am in the business of knowing my inherent personality and was able to respond that as an initiator I like to take bold, aggressive actions and create the rules.

I prefer to lead decision-making, setting the agenda to get things done. I don’t want to get caught up in minutia and will make fast well thought through decisions. Give me a challenge and I will deliver an outcome.

Not a lot phases me. I’m level-headed in a crisis but being given the “run around” or having my time wasted on irrelevant issues irritates me as would investments that do not live up to the advisors claims.

As leader, and in the face of these unprecedented times, it’s right that those I lead, and our customers, should know how I stand up in a crisis.

There are tough decisions to be made not just in our business but in our customers businesses. My advice to leaders is this – get to know your crisis personality. Without this insight you will not be able to manage your responses. After that, use the same validated scientifically based behavioral tool to reveal the personality of your team leaders and key decision-makers.

One of the significant areas we are involved in is working with financial advisors as they connect with their clients. Not only has the financial industry faced remote working, no face to face contact, but it’s important to remember that those giving advice are themselves deep into the chaos of what is happening right now. They are facing overwhelming workloads while dealing with the same stress of isolation possible financial ruin as their clients.

Yet those advisors who have a strong platform of behavioral insight are faring well. They know themselves; they can manage their own emotions and behaviors at a time like this and pass this insight onto their clients.
For the most part financial advisors have taken a leaf out of our book and moved swiftly to virtual working with the use of conferencing software to stay connected with clients. For many, the relationship is going well and for many more, it’s unlikely their clients will want or need to go back to face to face meetings.

financial personality

One of the most effective tools we find our customers praising is being able to have the financial personality of their clients in real time on any device. Just before jumping on a zoom or phone call they can refresh their memory on the financial or behavioral personality of the individual they are about to speak to and advise them based on that personality insight.

financial personality

We have found that those most people likely to emerge from this season successfully can cope well with rapid change. They remain calm and thoughtful yet still able to make well thought through decisions quickly.

As an industry leader, you need to know and understand your crisis personality. Once revealed it can be managed. Why not check this out now – free on me, no agenda, you will be glad you did.

If you want to talk to someone about the outcomes use the link below.

Financial DNA Profile
Appointment Link
Hugh Massie’s Book

2020-Resist-Negativity

2020: The Year to Resist Negativity

How many times have you begun a new year with a great expectation of what the year will bring in terms of success only to have plans, hopes and dreams dashed at the first sign of negativity?

Why do we take on a throwaway remark directed towards us or feel crushed when we make a mistake?

I for one spent my teens crippled by being oversensitive, blushing at just about everything and feeling pretty incompetent. I wouldn’t go so far as to say I had a negative bias, but I certainly “heard” the could-do-better comments in school reports or staff reviews, rather than the greater number of “well done” comments.

Discovering a… discovery

So, what turned me around and why do I begin 2020 with Grand Plans?

It’s actually quite simple: I completed the DNA Natural Discovery process. In just the 10 minutes it took to complete the questionnaire I was able to read about the unique me. It served as a light-bulb moment.

I then began to understand not just myself, but the people who made me feel self-negativity. I’m good with people. I see ways to encourage them. I set and accomplish goals. I’m innovative, spontaneous, yet analytical, reserved and guarded.

It then didn’t take much of a leap to understand the behaviors of others that put me into a crushed mode.

Others whose behavior manifests in being very outspoken and outgoing or take charge and fast-paced challenge me. They don’t mean too, its just their natural behavioral style.

My light-bulb moment was not so much knowing who I am; I think I inherently knew my qualities. The revelation, if you will, was understanding how to manage the differences between myself and others behavior. That was what took me to the place of confidence, resistance, determination and optimism in knowing who I am and what my contribution to the world is.

Knowing the course ahead

As I make my grand plans for 2020, I know to ensure they line up with my gifts; what I can and can’t achieve. I know the importance for me in taking small steps toward my grand plan. I know I need time to research and think through before investing time and other resources in my grand plan. I know the value of building time out to reflect on the small steps I will take toward my grand plans.

But, perhaps more importantly, I now know me. I understand my inherent behavior. I recognize when faced with a different set of behaviors how best to navigate those differences and to manage relationships which would otherwise have me running for my negative corner.

I now know that as a people person I can even invest my skills in others so they can see the impact of their behavior on me. That way, it helps me better help them in our work together and helps them better themselves in other interactions as well. They can come to understand the importance of gaining knowledge for themselves in how to manage the behavioral differences we humans have that makes us all so unique.

Take a look at my Work Talents Report, adjacent to this article, and consider what your own might look like. (Further, think of having your report alongside the report of a collaborator. What power you would have in making the most of the collaboration for you both!)

Work Talents Report_Carol Pocklington

Your best year ever

I trust 2020 for you will begin with Grand Plans and hope that you are open to invest just 10 minutes into understanding your behavioral style. With this knowledge and insight, I believe no form of negativity or different behavioral styles will cause you to fail in delivering your best year ever.

The DNA Behavior team would like to extend to you a complimentary natural discovery process. Take it here. Begin your 2020 with a greater insight into your unique behaviors.

Veterans day tribute

A Veterans Day Tribute: Natural Behavior in the Crucible of POW Life

Lee Ellis served as an Air Force fighter pilot flying 53 combat missions over North Vietnam. In 1967, he was shot down and held as a POW for more than five years in Hanoi and surrounding camps. Today, he is an award-winning author, leadership coach and speaker on leadership, teambuilding and human performance. Notably, DNA Behavior Founder Hugh Massie identifies Lee Ellis as a crucial mentor in his life. We are honored to have this Veteran’s Day reflection from Colonel Ellis.

As we celebrate Veterans Day 2019, it’s a good time to reflect on the brotherhood shared by those who wear and have worn the uniform of our armed forces. Those who have served have a bond– something that they have in common that draws them together. Quite often that bond is based on suffering and sacrifice. It begins with basic training, because every person who enters the military must endure some sort of a boot-camp experience that levels the playing field and requires participants to work together to succeed.

It’s intended to take you out of your comfort zone and force you to collaborate to succeed. Camaraderie begins early and usually endures. So, whether it’s at the VA, the American Legion, AMVETS, or Disabled American Veterans, they like coming together with their buddies and those who have been there, for instance, struggling to re-integrating into society.

Behavior in the POW Camps

During my time as a Vietnam Prisoner of War, the living situation varied from isolation to cells of four to six people, but eventually we spent almost two years locked up in one large room with 52 strong-willed, competitive aircrew cellmates. There were no inside walls in this cell of roughly 1800 sq. ft.; it was packed with bodies and the only place you might be able to get alone was the two-holer- basically a squat trench over the sewer in a small room at one end. The POW’s slept elbow to elbow on a raised concrete slab. There were some hard times, but it was the perfect laboratory to learn about human behavior.

In this enlarged sardine can, you could not hide nor pretend. Your best and worst behaviors were on display 24/7 day after day, month after month, year after year. Packed together so closely with our struggles so open and obvious, we could see how they were problematic. First, we saw it in others who irritated us.

But over time, in ways that were sometimes subtle and often blatant, we learned of our own blunders and shortcomings. It was there that we came to accept that we were all unique and that we could not change others. In effect, there was a mirror there to show us what we had not seen before. In this behavioral laboratory with the suspension of time in the camps, we were motivated to go to work and so we did.

With little to do, most of us decided it was a good opportunity to grow and develop. We soon organized an educational program with formal academic classes six days a week. It was optional, but most guys engaged in some of the classes. The teamwork in that cell became remarkable. We organized everything, assigned and rotated duties, and most importantly learned the power of respecting and caring for others – even those who irritated us the most. Only twice in those 20 months did someone raise their voice at another, and in both cases, they apologized before bedtime.

All Styles are Leaders

I often share my story and highlight the great leadership and point out how it came from various styles of behavior. There was not just one style that excelled, but what was common were the three characteristics of Character, Courage and Commitment – and the ability to focus on both Mission and People.

From my and Hugh’s combined 45 years of experience in leadership coaching and otherwise working with thousands of leaders, we know this is the secret sauce. No matter your natural talents or personality style, you can be a great leader if you have integrity and learn to adapt your behaviors to accomplish the mission (get results) and take care of the people (build trusting relationships).

This is the great advantage of the military. Both in the training on the fields of friendly strife and in combat, warrior leaders learn that you must walk the tightrope of accomplishing the mission and taking care of the people — some have even adapted the slogan Mission First-People Always. Veterans understand this profound wisdom and stay connected. And on this day, we pause to honor them for their service and offer our heartfelt appreciation.

If you are intrigued by this paradox of leading and managing to maximize both people and mission, please check out Lee Ellis and Hugh Massie’s latest collaboration, the soon- to-be released book, Leadership Behavior DNA: Discovering Natural Talents and Managing Differences. Pre-orders online at Amazon, Barnes & Noble and other popular retailers. Book-related events and speaking engagements will be announced soon and can be scheduled via contact@freedomstarmedia.com.