Identity Conversation with Hugh – Financial Preparedness

It’s not every day that you come across a platform dedicated to educating consumers and advocating for financial preparedness. In this Identity interview, Hugh sits down with Tony Steuer, Chief Content and Financial Education Officer of Paperwork.

Tony Steuer is based in California. He is passionate about financial literacy and educating consumers on best financial practices.

Tony started his career in the insurance industry and was exposed to the ins and outs of the financial space in the United States. He realized that consumers were not fully educated on the financial services they were buying or aware of the right questions to ask.

While doing litigation consulting for wealth management firms, he realized that most of those issues consumers face have more to do with lack of education than malice. Granted there are some ill-intentioned individuals out there taking advantage of their clients, but not only does the lack of financial literacy not help, it actually creates a gap between both parties

Tony retired from being a consultant and has been dedicating his time to financial education and consumer advocacy with Paperwork. His goal is for consumers to feel empowered to make financial decisions that serve their long-term goals.

Click below to watch the full interview.


(Far) Beyond Risk-tolerance Questionnaires

My colleagues and I have been having an active discussion about the relevance of risk-tolerance questionnaires. So, I was excited to see a Sept. 6 article in the Wall Street Journal by Jason Zweig, “Knowing if you can stomach the next big market swing.”

Not the right data, not enough data

Zweig’s bottom line, “Any good adviser should devote more time to your risk capacity and your goals than to your risk tolerance.” In leading up to that point, he makes the case that risk-tolerance questionnaires not only don’t go far enough in that they target just that one metric, but also says they may not even be accurate in that area – at least not in the long run.

Research cited by Zweig notes that risk-tolerance questionnaires are susceptible to being short-circuited, for instance, by emotions of the moment. Thus, a questionnaire that should be predictive across your investing for years to come may really just reflect your risk tolerance or aversion that day.

Similarly, when looking at what different advisers do with risk-tolerance survey results, we see adviser bias. That is, the questionnaire’s results can be — and are — interpreted by financial pros in significantly different ways. Further, Zweig says its known that advisers often ignore the results of such surveys altogether.

This article identifies the problem with traditional risk profile questionnaires that we overcome with a more objective, non-situational psychometric model — validated insights that provide a fuller, more lasting set of robust data points that may be relied on, theoretically, in perpetuity and which cannot be gamed by investor or adviser.

The right info, better results

Among the differences with our 17-years-in-the-making Financial DNA tools: We do not have market-driven questions that lead to situational bias. We do not get into market perceptions. The questions we ask are neutral to education, experiences in the past, feelings and more.

We get a broader set of insights, including behavioral biases, spending, goals and communication. Most people do not understand risk because it is not explained well and knowing communication style powers better communication on such key points.

The power exists for investors and advisers to better assess risk…and to move beyond just that one metric. Still, I continue to hear — anecdotally and directly — that some advisers think their clients won’t take the time to complete the more accurate and more robust discovery process.

If I am to believe that, then it means most investors are not willing to spend 10 to 12 minutes gaining insights that will impact their portfolio for a lifetime. (Insights that, by the way, also can powerfully affect decision-making and relationships across any and all facets of our lives.)

Rubbish! That’s a supposition I cannot accept.

The proof is in the pudding

A forced-choice scoring model like ours is academically proven to be one standard deviation more accurate than the Likert Scoring Models (aka, situational questions used in traditional risk questionnaires). The traditional scoring model of risk profiles leads to over-inflated scoring and situational results, whereas forced-choice scoring provides a more accurate and reliable starting point for long-term decision making.

The forced-choice questions also lead to more predictive measurement, making a subjective process more objective. For example, non-situational phraseology consistently measures ingrained (rather than learned) behaviors. They lower the chance of misinterpretation. Traditional situational questions lead to inconsistent measurement, meaning responses change depending the situation and market, they are difficult to interpret and require more education, and they tend to over-state strengths (like risk tolerance) and understate struggles (challenges you and your adviser will face).

Finally, a short, tight discovery process deploys validated questions that lead to highly accurate, deep and reliable results which remain consistent for the long term. And again, they are harder to game.

Not convinced? Complete the Financial DNA discovery for no-cost and no-obligation. You’ll ultimately get a one-page infographic report with actionable insights. Now, imagine sharing that report with your adviser (or with your client if you are the adviser) and having this brief investment of your time paying dividends across your portfolio and the rest of your life – for a lifetime.

Formula for Change (#111)

Change is never easy. It’s hard enough to create within ourselves, but even harder to drive change in others, whether that’s in our roles as parents or business and community leaders.

Dr. Abdul-Malik Muhammad has spent his life learning how to create positive change.  He was born into a family of poverty and his biological father passed away just three months before he was born. He and his family were homeless by the time he was eight-years-old and he was only ten-years-old the first time he was arrested. What followed was many years in and out of shelters and detention centers.

His destructive path was interrupted when his mother and step-father decided to move the family out of the city to a small town, ultimately leading him on a life-changing path.

Not only did he graduate high school, he received an academic scholarship to college, becoming the first person in his family to attend university and graduate. Today, he is both an inspiring entrepreneur and community leader, working with thousands of at-risk youth and businesses on affecting positive change.

In evaluating his own journey and how his company Akoben has been able to impact the trajectory of so many lives, Dr. Muhammad discovered what he believes is the formula required for creating lasting change in ourselves and others. That formula is:

Change = Connection + Challenge

The implication is that the most effective leaders find a way to both connect with and challenge others – simultaneously. It’s this combination that is the foundation of change.

One without the other doesn’t work. Challenge without connection is based in command and control or authoritarian principles. Because the person initiating the challenge lacks moral authority, it is likely to be ignored or scoffed at outright.

Connection without challenge is often permissive, so it fails to create standards or raise the bar. It’s often the mindset of “no progress, no problem.”

Leaders need to have the emotional intelligence to know which way to lean based on different circumstances. Sometimes challenge is required to create a connection and sometime connection is needed first to earn the right to challenge. When you have both, you can drive meaningful and sustained change, in yourself and in others.

Consider these principles in terms of a health goal, such as losing weight. So many people are unsuccessful in their efforts because they don’t have a meaningful goal or the right level of support. When they have both, the odds of reaching and sustaining a healthy weight go way up.

Another point related to connection + challenge = change is how parenting, coaching and teaching styles have evolved over the past few decades, moving from the “challenge” quadrant to the “connection” quadrant.

Today’s parents tend to insulate their kids from failure and children are often praised and given accolades in school and extracurricular activities just for showing up, even when they’ve done nothing to deserve it. The consequence of this is that kids are missing out on important lessons that failure teaches and the positive change it can bring about.

If you want to learn more about how this change formula can be applied to how you lead within your organization, family or community, you can listen to my recent podcast interview with Dr. Muhammad.

Quote of the Week

“Accolades and praise preceding effort creates dependency and weakness.”

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Prism or Laser? (#109)

Understanding the fundamental difference between a prism and a laser can predict success in life and business.

Allow me to explain.

A laser takes light and amplifies it, turning it into a powerful, focused force. It creates heat.

By contrast, a prism refracts light and disperses it into several different color streams that lack any heat or power.

I can’t think of a better analogy to describe different people’s approaches to life and achievement.

A great example of this is what I will call the “prism entrepreneur,” who, for conceptual purposes only, we will refer to as Paul.

I have met a lot of Paul’s over the years. After some early success in his business, Paul gets over-confident and distracted. He starts doing a lot of new and different things and gets excited about starting (not finishing) new projects and businesses. His thought process is that, by putting a lot of his time into more things and dispersing his energy, he’ll be more successful.

Here’s the rub with this approach. If I check back with Paul 6-12 months later, he’ll most likely have started losing (or lost) focus, his initial business will have hit an “unexpected” rough patch and the new projects/businesses that he started are either in trouble or shuttered.

Are there exceptions to this? Sure. But more often than not, this is the typical trajectory.

Prism entrepreneurs like Paul are often doing a lot, but are not getting a lot done. While it can feel rewarding in the moment, they are riding the hamster wheel. I speak from experience as I’ve been Paul many times in my career. I have learned through repeated failure, however, that doing more has almost never worked. From my experience, better outcomes occur by stepping back, doing less and simplifying my life or business.

On the flip side is the “laser entrepreneur,” who we will call Lisa. Lisa is focused, has a plan and, upon seeing early success, she does not deviate course or get distracted. When Lisa sees that her plan is working, she doubles down on her current strategy, stays the course and focuses on excellence and being the leader in her market.

She eliminates distractions and stops doing things that don’t support her goals or values. Almost always, she achieves success faster than she could have imagined.

I think many of us tend to get enamored with the Paul’s. Our perception is that people who do a lot, renaissance men/women if you will, are more successful. The reality is that most of the data and real- world experience shows the opposite.

We only have so much time and energy to give. As such, applying it in a focused way produces better results. What might confuse us, however, is that there are many people who look like Paul’s, but are really Lisa’s. They have a carefully selected portfolio of business, interests or activities that support the same long-term goals and values. And not only do they reinforce each other congruously, there’s often a multiplier effect.

2018 is well under way. As you head into a new month of a new year, it’s time to decide… do you want to be a Lisa or a Paul?

Taking that a step further, it’s also the time to identify the Lisa’s and Paul’s in your teams and in your life.

The best advice I would give anyone is, pick a direction or focus, simplify and eliminate distractions. Don’t let everyone else’s priorities or distractions become yours.

Quote of the Week

“I don’t care how much power, brilliance or energy you have, if you don’t harness it and focus it on a specific target, and hold it there you’re never going to accomplish as much as your ability warrants.”

Zig Ziglar

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Game Face (#108)

“There is no way the kicker is making that field goal.”

I made this bold proclamation to a table full of colleagues as we watched the recent College Football Championship game between Alabama and Georgia.

Alabama was in the middle of staging a comeback that would set them up for a game-winning field goal. Their kicker, Andy Pappanastos, had badly missed a 40-yard field goal and barely made a 30-yard one early in the game.  (For non-US readers, that distance is usually considered quite achievable).

Now, here he was, with a chance at redemption. A relatively short field goal would give Alabama the national championship in a dramatic comeback. He should have been pumped.

As Alabama marched down the field, the TV crew kept panning to the sideline where Pappanastos was doing his warm ups for the kick. What you usually see is a kicker with his head down, focused, with his game face on; perhaps visualizing being the hero for his team.

What I saw in the look of Pappanastos’ face however, was fear, panic and the look of “I’d rather be anywhere than here.” He looked like he wanted to throw up.

After Alabama was unable to score a touchdown, Pappanastos trotted onto the field to attempt the 36-yard field goal for the win. Neither the color in his face or his expression improved. He looked visibly uncomfortable, thus leading me to repeat my prediction to the table.

And I was right.

Seconds later, he kicked. The ball went way left of the goal post, sending the game to overtime. It was what we refer to as a “shank,” very far off; a mishit.

Fortunately for Pappanastos, his teammates bailed him out in overtime with a dramatic 60-yard pass, which was, ironically, thrown by an upbeat and confident Freshman quarterback playing in his very first game.

There are a few key lessons that can be gleaned from this story.

1. Brain/Body Connection. It’s really hard to get your body to do something well if you mind doesn’t want to do it. We all know the difference in the look of defeat on someone’s face versus the look of hope and optimism.

2. Confidence & Projection. How we project ourselves to others matters. Studies conducted by Dr. Albert Mehrabian reveal that 7% of any message is conveyed through words, 38% through vocal elements (tone, timber, pitch, etc.) and 55% through nonverbal elements (facial expressions, gestures, posture, etc.). For example, if I am telling you I want your feedback on a project, but am scowling at you with crossed arms, that’s not the message you get.

The implication is that, when you have a big challenge or opportunity to tackle, your mental preparation combined with awareness of your body language, has a big impact both on your performance and how you will be perceived by others. Those two are also likely to be connected.

Even if you don’t make the metaphorical field goal, it’s better for others to perceive that you had every intention of doing so. That, combined with a high level of confidence, should improve your chances of success.

Quote of the Week

“Pretend to be in complete control and people will assume you are.”

Walter Isaacson

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Stop Doing List (#107)

For many of us, the first few weeks of 2018 are focused on goal creation and to-do lists for the developing year. While those are certainly important, I’d encourage you to add one more thing to your agenda that will likely contribute the most to your success in 2018: a “stop doing” list.

The most successful people and businesses know how to focus on what needs to get done and what they need to stop doing in order to make that happen.

If you want to make room for new initiatives this year, then some old things need to go, including using “being busy” as an excuse for not getting the right things done.

Here are three areas that companies and individuals should consider when determining what to stop doing this year.

For businesses:

  • Projects/Products/Offerings: In our process of evaluating which products and strategies we want to focus on at Acceleration Partners (AP) this year, we are simultaneously planning to eliminate a few current offerings. These are the sectors that just aren’t performing as expected or that are taking us away from focusing on higher growth opportunities. We know we can’t do everything and are getting better at making the tough choices.
  • People: Most companies make tough people decisions 6-12 months too late. Now is the time to face these challenges head-on. This may mean finding new roles for people who are underperforming or helping them transition out of the company to one that is a better fit. Honest conversations lead to better outcomes for everyone involved. At AP, we’ve implemented a process we call Mindful Transition with the goal of making inevitable job changes less taboo and more productive.
  • Clients: Every company deals with clients/customers who are energy drains, unprofitable or toxic. These traits pose a risk to your employees and overall organization. Last year, we discussed which clients we would want to move away from if we could not take on any more work. In this process, we realized that we’d be better off moving on from these clients sooner rather than later; this strategy has paid off in terms of profitability, productivity and overall happiness levels of our team members.

For individuals:

The goal here is to focus on the activities that drain your energy or take you away from reaching long-term goals and objectives.

  • Tasks & Time Wasters: Take a hard look at specific tasks and activities you regularly engage in. The ones that exhaust you or feel like a chore should go. This may mean finding a grocery delivery service, removing Facebook from your phone or, in my case, finding a service that can take over paying 90% of my bills. You need to be honest with yourself about where your time is going and how it could be better spent so you can use your time and energy in ways that have more value and support your higher goals.
  • Commitments: Commitments are a level above tasks. They are the recurring investments of your time. They might include a committee you volunteer on, a class or a regular get-together. Whatever they are, some may have run their course. Moving on from them can refocus and reenergize you, which allows you to allocate time, energy and resources towards something new. For example, once I realized how valuable my morning routine is to my day and life, I stopped doing breakfast meetings altogether.
  • People: To quote Jim Rohn, “You are the average of the five people you spend the most time with.” I can’t think of a more powerful statement. One of the most important things you can do in this life is to move away from relationships and people who no longer align with your values and direction. If you feel worse after spending time with someone, chances are they’re an energy vampire. Albeit difficult, it’s likely time to pull away from them, even if they are family. This doesn’t mean burning bridges, it just means that you stop engaging, making plans or giving that relationships as much of your precious time and energy.

This week, as you add to your 2018 list, take time to think about what you or your business needs to stop doing this year to be successful.

Quote of the Week

“If you want something new, you have to stop doing something old.”

Peter F. Drucker

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