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How to Get Started With Financial DNA in 5 Steps

Financial DNA is a comprehensive and customizable tool. It will guide you to work alongside your clients as they tune into their financial personality and money habits. 

By using the very same tool top advisors around the world are using, you will be able to enhance your investor experience. We have created this guide to seamlessly assist you in getting started with Financial DNA.

Step 1: Set up your admin system

If you purchased Financial DNA through an enterprise, your account may have come pre-configured with some basic settings to get started. If so, you can skip this step. Otherwise, if you did purchase it on your own, you can easily upload your logo and apply a few basic settings to get started. 

If you sign up for a Financial DNA package, there are several different customization options available. You can customize the web-screens and reports with your logo after signing in. If you were not directed to do this, please contact our support team so they may assist you in customizing your profile. 

Step 2: Customize your messaging

The best way to learn something is to try it for yourself, and Financial DNA is no different. By testing it out yourself, you will go through the steps as an investor would so you will always be talking from first-hand experience.

Once you have completed your own Financial DNA, it’s time to start inviting others. We do have a variety of free templates that you are free to use to assist you in creating compelling email invitations that others will want to join. 

Step 3: Recruit your 5 first users

You’ll soon see how Financial DNA can be used to help your clients. Invite five friends or family members to use Financial DNA to complete their own discoveries and you will quickly understand how ‘real-life’ actions translate into our DNA reports. 

Financial DNA is here to assist you in being comfortable and familiar with our product fast.

In the previous step, we provided sample invitations for you to use to invite family members and friends. Once they have completed their DNA,  you will be able to practice your client conversations with them using these results so that you can become familiar with Behaviorally SMART conversations.

Step 4: Review & connect

Step 5: Schedule your coaching session

Another useful advantage to you is that our team will invite you for a free one-on-one coaching session with our coach, which is included with each Financial DNA package.  

In this interactive call we’ll answer any questions you have about what is included in your package and provide an opportunity for some hands-on practice, debriefing clients using our Behavioral Smart Meeting approach, so you are well prepared to be able to confidently converse with your own potential clients.

Conclusion

Financial DNA is the future of advisor/investor relationships. Top investors in the world are using it, and so should you. 

The best way to discover and learn about Financial DNA is to try it out yourself with a free trial

We’re all about giving people an easy way into getting started on this financial journey, which means that we offer you this 5 step guide to getting started right now, where users can get acquainted with our platform before they commit to anything long term. 

We are sure you can see the benefits of using Financial DNA and should this now be something you want to explore further, please go ahead and access our free trial and get started working towards your advisor/ investor goals. 

5 Things to Know About Behavioral Finance

To be able to fully understand an investor’s decision-making process, financial advisors need to equip themselves with the knowledge, skills, and understanding of Behavioral Finance.

When taken right back to the bare bones of it all, a human being’s most basic natural instincts are based on emotions and psychological reactions triggered by a variety of events. When it comes to making investment decisions, these natural reactions are brought into this as well.

A second way that humans make decisions is through conscious thinking. Now, these behaviors are slightly different from survival behaviors because they are learned as a result of experience, and so people are able to adapt to changes in their environment. 

These natural instincts as well as the learned behaviors, all carry across into the financial decision-making actions that people act upon.

 1. What is Behavioral Finance?  

Behavior Finance is essentially understanding the underlying psychology of financial decision-making. It combines cognitive psychology with economics and finance. 

The objectives of Behavioral Finance are to understand why individuals make certain investment decisions.

For example:

  • Emotions are responsible for our quick assessments that influence financial decision-making. Positive emotions lead to more risk-taking, optimism, and in addition, buying decisions are made faster. Investors are well aware of the roller coaster of emotions they go through including hope, excitement, euphoria, fear, despair, regret, and sadness.
  • Another example is Herd Mentality. Herd Mentality is when a person feels pressured into making a decision just to conform with the largest crowd and their rationale behind it is that ‘so many people are doing it, it must be right.’ The dotcom bubble is a perfect example of this. Between 1995 and 2000, investors were backing internet-based startups hoping that they would soon make a profit. 

2. We all have biases

We all have Behavioral Biases which are irrational beliefs or behaviors that can unconsciously influence our decision-making, and stray us from rational decision-making.

However, our biases lead us to make less than optimal decisions.

The Behavioral Biases embedded in humans are responsible for irrational decisions that result in poor financial or insurance investment. We need to be made aware of our personal biases and try not to let them influence our financial decision-making. 

As Hugh Massie, our CEO and Behavioral Strategist explains, we focus on 16 Behavioral Biases that affect people’s financial decision-making. Once you can identify and understand your top two or three biases, you can become a better decision-maker, especially when under pressure.

3. Spending patterns are written all over us

Behavioral Finance is the answer for advisors who want to learn more about investors and how they intend to spend their money.

It has typically been a problem that advisors haven’t had enough information and insight into their clients’ spending patterns and as such, could only create financial plans without truly understanding what people planned on investing in or saving up long-term.

4. You can’t spell “behavior” without “risk” in it

By now, as an advisor, you should be able to understand that a person’s behavior is intrinsically coupled with the amount of risk they are willing to take. To be able to help your investors experience long-term financial success, determining their risk factor will play a major role in determining their strategy.

When you choose to work with us, you will benefit from our Financial DNA reports that provide a step-by-step approach to determining the risk behavior of clients, couples, and advisors.

You see, every single person has a Risk Behavior number ranging from 0 to 100, and it’s based on their Risk Tolerance and Risk Propensity. A higher score means they are more likely to take risks. The score is normally distributed with an average of 50 and a standard deviation of 10.

5. Financial DNA takes the guesswork out of investing

When you work with us, we help you build a system to understand your clients, where you will be able to connect with them, and customize their experiences.

By understanding your client you will be able to communicate with them in a more relatable manner; you will to know and understand their risk behaviors and spending patterns and it will be easier to understand and determine their financial goals. 

Our Financial DNA API sets us apart because it measures 500+ behavioral insights and will be a way to add a human element to your data. This is done with details on how people communicate, invest, work and live their life.

In Conclusion

At Financial DNA, we have years of experience to help you better understand your clients. If you are interested in our Financial DNA investor experience, basic Financial DNA reports, and 1:1 onboard coaching, start a free trial today.

Financial DNA Empowering Female Voices

Earlier this year, I sat down with Danny Liberatore from The Wealth Enrichment Financial Group to discuss the impact Financial DNA has had on his practice, and how it transformed the way he works with his clients. 

Working with female investors

One of my biggest takeaways from our identity conversation was Danny’s approach in working with female investors. He mentioned that most of his clients are females and that Financial DNA insights have enabled him to foster meaningful relationships with them.

You see, female investors don’t want to be treated any differently than men, however, their communications styles are different. They want to be part of the process. They have a savviness for the intricacies of our work and appreciate the educational part of it all.

Danny Liberatore

Behavioral finance insights particularly come into play in this situation when you are working with male and female partners. Their dynamics unravel from day one, and you need to pay attention to their behaviors in order to understand them better and manage their biases.

Involve both in the conversation

Danny shared with me that most of the time, the women are different from their partners, in terms of behavior and responsiveness. 

It is no secret that the financial service industry has done a very poor job trying to understand women and genuinely helping them. What happens more often than not is that they are being ignored and their opinions are unsolicited or unappreciated. 

As a financial advisor, you need to be able to wear different hats when working with couples. When you make the effort of explaining things differently to your clients and accordingly to their behavioral styles, you get instant breakthroughs. 

Danny mentioned that he’s made it a habit to always address the wife first and disclose to the husband that while he might be addressing him later on separately, he doesn’t want him to feel ignored or unappreciated. He will ensure to bring the husband back into the conversation and keep her engaged.

The truth is, once you honestly explain your process, your clients instantly feel included. It not only puts them at ease, but it builds trust. And we all know that trust is a fundamental factor in advisor/client relationships. 

This is a common situation for FI’s to find themselves in. When the female is not the breadwinner or the creator of the wealth, you’ve got to make her even more involved, without leaving the male out either.

How it usually starts 

When meeting with a potential client for the first time, pay very close attention to the couple dynamics as they unravel before you. It is common for men to take on the lead role in a conversation with their advisor, especially at the beginning. 

However, if it gets to the point where the female’s opinion is not taken into consideration or is not solicited at all in the planning process, that should be a red flag for you. You need to make the effort to always keep them engaged and involve them in the conversation.

You can also look at it from a business perspective. Let’s say you are taking on this new client that has great assets and potential for revenue growth. If you strictly focus on working with the husband, when life happens and you find yourself in an intergenerational wealth transfer situation, what are your chances to still be the financial advisor for that family? 

Final thoughts..

When working with your clients, it might feel normal to engage the one partner that takes on the role of leader and simply overlook the other. The risk you are running there is to not only alienate one of the decision makers but also falling victim to your own status quo biases. Pay attention to your client’s dynamics, keep both of them engaged, and build what could potentially be a lifetime working relationship.

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.

Advisor-Client Chemistry

Do you have the right clients? This is a very topical issue for many financial planners, particularly those who have already built a business to a reasonable level. Actually, it is as important as the client selecting the right advisor.

In the end there must be a mutual relationship with the parties comfortable with each other. The relationship cannot start out (but it often does) with the client simply having dollars in the bank account and some financial planning needs, and on the other side the client believing the advisor has the skills and the necessary integrity. In fact, these are all assumed to get to the point of the first meeting.

Our business is all about looking at the behavioral style of the clients and also the advisors. So, not unexpectedly, the approach we take is to match clients and advisors based on their behavioral style. This is very much an inside-out approach, however all great relationships start below the surface. Human behavior is at the core. The great thing is that the Financial DNA system measures natural behavior which means we can reliably predict the behavioral style of the advisor and client in terms of how that person will always be, particularly under pressure. I would say that our approach must still be blended with a number of other more traditional selection factors such as client size, service style, values, expertise, etc. that are mentioned in Bob’s article.

To help the advisor we have developed an Advisor/Client Compatibility Matrix. The matrix is a one page grid which matches profile styles based on the level of modification that will be required between advisor and client. To be clear, it does not say you cannot work with someone, but it does say who will be easier (green box on the matrix) based on less behavioral modification – this is where communication, chemistry, etc. is likely to be higher. Hence, this is where the relationship will be naturally more sustainable over a longer period with less stress. So if you are an advisor wanting to segment your client base a reliable starting point is now provided.

I do not necessarily advocate that you fire those clients who will require more behavioral modification (red box on the matrix). This will be a warning sign that you have to put more work into adapting to maintain the relationship. Although what you may wish to do is allocate these clients to a partner who is different to you or hire someone who is different to you to provide a complementary style. Many advisors have found this approach to be foundational for selecting their next hire. Or in how they deliver client service with a team-based approach. Hence, the planner may get the relationship started and then another person on the team steps in.

Are you interested in the value of your practice? Importantly for advisors, this approach also helps you to identify to whom you sell your business. The sustainability of the relationships and hence the revenue is critical to business value.

Recognize, Break Away From Herd Mentality

– First Published on Nasdaq –

one of the challenges financial advisors face is the tendency for their clients to come to them already influenced by “group” think or herd mentality.

“Everybody is buying XYZ; I need to get in on this!”.

“No one is staying in International Doodads. The guys on my Pickle Ball team say I should get out of that and lean into derivatives.”

Clients know the importance of seeking advice from qualified financial industry professionals yet can make life-changing decisions based on a night out with friends or the sensational advice of a grandiloquent radio host.

And, yes, sometimes otherwise smart investors are persuaded by the comfort of a crowd. After all, the advice may come via a relationship through whom they get trusted advice on many other areas of their lives. Or from someone seen as successful…so the advice must be worth following, right?

Coming out of a divisive election year, herd mentality is at the forefront, beyond just the financial sector. So, we have it in perspective; it just should not be part of your investment strategy.

Core insights, core advice

Clear thinking requires financial professionals to be able to understand where enthusiasm for an investment or disinvestment is coming from and how to respond to a client’s bias. An advisor must help that client pivot their thinking in a positive and safer way, visualizing the situation from a different perspective. This, in fact, is a core reason for having a financial advisor or coach.

So how can a financial professional do this? Do they know bias can be revealed?

Financial advisors who are serious about understanding the client behavior invest in a behavioral component for their existing tech stack. The benefit: Revealing a depth and breadth of insight into their clients.

Behavioral insights also alert advisors to those clients who react in the moment and revert to long-held beliefs that often hurt their returns. This could be panicking and selling or excitedly panicking and doubling down on exactly the wrong investment.

Mining for insights

We all know the importance for advisors and clients to separate emotions from investing. But, again, how to actually do that? The trick is learning enough about inherent biases to be able to manage them.

Without that information folded into their workflow, advisors may find themselves locked in emotional exchanges with their clients. Or at least unable to move a client off a damaging commitment to the wrong vision or ill-informed advice.

Behaviorally smart advisors understand that everyone reacts differently to turbulent markets. Having behavior tech insights into a client, they can coach and educate their clients – and do so in ways tailored to each client – to move beyond herd mentality.

Using a behaviorally smart financial discovery, an advisor will know of client biases from the get-go. They will know which clients are likely to field bad advice and take it to heart. Best, they’ll be well-prepared to keep clients from jumping on the latest bandwagon.

The client also would be the beneficiary of these insights, so they can “check themselves before they wreck themselves,” as my mentor, Hugh Massie, likes to say. So, don’t think of behavioral insights as something the advisor holds close; there are insights about the advisor and about the client and all should be shared with each.

Breaking away from the pack

Herd mentality is a dangerous bias. And there is a clear responsibility for financial advisors to ensure they provide clients with highly individualized guidance.

If they are indeed armed with behavioral insights – on themselves and, especially, on their clients – they can even provide proactive guidance when client information might not be congruent with other, external perspectives. 

When an individual and their advisor are equipped with quantifiable insights, they can recognize and break free from the herd. After all, investing is not a group sport.