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Does My Advisor Understand His Own Bias (Digitally)?

– First Published on Nasdaq –

I recently had an interesting conversation with an investor who had attended a behavioral finance webinar.

He shared that his advisor’s level of communication had improved dramatically – from being less tolerant and on occasions showing bias – to having a meaningful conversations about life-goals and how to tolerate sudden market movements. “I finally felt I was genuinely being coached instead of being bullied,” he said.

It seems the advisor’s firm had recently invested in adding a behavioral tech solution to its advisor portal. The client recalled completing a 10-minute questionnaire and learning more about his investing and spending habits. In addition, the advisor now had access to a range of dashboards and personalized information that enabled him to respond to his client’s specific goals, wants and needs digitally.

The investor was more than happy to see the level of communication lift and to have the advisor considerably more focused on his individual needs. He also noted it was the advisor’s own lack of bias that was the most notable.

I pressed the investor for an example or two.

“I’m a cautious investor,” he told me, “in fact I’m risk-averse and likely to respond to troubling market movements by selling, probably at the wrong time, but that’s who I am. I always felt my advisor had an edge of criticism when I shared my concern about uncertain markets and how they would impact my life goals.”

He went on to say that the advisor, through understanding him at a deeper level and checking his own bias (the advisor is a comfortable risk-taker) now understands how his previous responses to the client’s risk aversion was at best naive and at worst unprofessional.

Understanding, overcoming bias

This exchange got me thinking about the impact of Diversity, Equity and Inclusion (DEI) in the financial services industry. When individuals are not aware of their own behavior and their own communication style, conversations can become toxic. Unintended, hidden bias is often the culprit.

That’s why doing everything possible to create an insightful human connection is so vital to so many business relationships, certainly including the financial advisory-client relationship.

Ultimately, we are all relying on a variety of video conferencing and other chat and tech platforms to conduct our business these days; however, when behavioral science guides the tech stack, inherent behaviors can be revealed in an instant digitally, making remote communication richer and more effective for all involved.

No longer is an advisor relying only on memory or CRM notes to refresh themselves on client behavior and how they might best respond to such. Behavior tech enables the advisor to know and understand natural behavior insights in real-time. By doing so they can better help the investor-client recognize that their behavioral biases are at play, providing perspective and, if needed, redirection and other tailored counsel.

These tools also can remind the advisor of their own bias and provide keys to remember when working with the client. This type of interaction creates a trusting relationship and reinforces the “know your client” fiduciary role to which responsible advisors are committed.

Feeling seen and understood

Unintended, unaddressed DEI issues are often at play when a professional conversation between an advisor and client leaves one or the other feeling stung or unheard. Consideration must be given to eliminating anything that causes confusion in a conversation because it can derail the interaction and even the entire relationship.

When a client feels behaviorally understood by their adviser, the relationship will flourish. Having insight into a client’s preferences, bias, communication styles and of course their “financial personality” reinforces the importance you as an advisor place on the relationship.

We all have blind spots. Most can be tolerated. However, those blind spots born out of ignorance are not ultimately acceptable, especially when there are tools to reveal and help correct. Add money and emotions to the equation and blind spots or bias can certainly harm or end client relationships. However, the client before and after experience above demonstrates that advisor-client service informed by validated behavioral insights is not only beneficial and powerful, but can actually save a relationship.

We can no longer sit back and tolerate a deafening silence on DEI, even if – or especially if – it is revealing itself via seemingly small but relationship damaging (or killing) occurrences. If nothing else, this recent conversation made me realize that the issues of diversity, equity and inclusion are part of the very fabric of all we do.

How will you spot advisor-client bias? How will you address it?

Scheduled System Maintenance: October 5th

Who this impacts:

Users of the new Financial DNA investor experience and the DNA API

What is happening:

From time to time, our hosting provider, Microsoft Azure requires DNA to update systems to maintain uptime, scalability, and security best practices. Microsoft Azure has recommended that we restart our systems to apply new settings available.

Most users of the DNA systems will not be impacted during this temporary maintenance window. During this time, features hosted on dnabehavior.biz will remain available. New discoveries and the use of the DNA Admin System will not be affected. Only users of the DNA API and the new Financial DNA investor experience will be impacted.

When it’s happening:

Scheduled maintenance window planned for October 5th between 1:00 am, and 6:00 am ET.

Actions to take if this affects you:

If your firm leverages the DNA API or the investor.dnabehavior.com discovery process, new discoveries and new requests for insights will not be available. Following this release at 6:00 am ET, all systems will once again be available.

For the DNA API, it is suggested that you make POST and GET calls outside of this window.

For users of the Financial DNA investor experience, if you typically have investor completing discoveries between 1:00 am, and 6:00 am ET the discovery process may be unavailable. We suggest that you let your clients know to complete the discovery outside of this window or to leverage self-registration links pointing to dnabehavior.biz (rather than investor.dnabehavior.com).  

When Clients Self-Sabotage Their Investments

When Clients Self-Sabotage Their Investments

This article first appeared on Nasdaq.

Since the global financial crisis and recession, clients are driving the industry in ways never thought possible (or appropriate).

Investor fears, lack of confidence and market uncertainty are provoking clients to demand better and more personalized advice from advisors. In this new client-led environment, advisors are struggling to understand how to navigate clients’ emotions, inconsistent thoughts and biases, while remaining in control of the advisory process. The relationship becomes further strained when the client presents as a know-it-all, bent on self-sabotaging.

Much is written about the role of the advisor and their behavior, but less about clients who don’t seek advice, but, rather, instruct advisors, perhaps to their own peril.

If the role of a financial advisor is, and should be, to advise, then what approach can they take to manage clients who know everything and think it is they who are the experts? Likewise, what to do when clients repeat mistakes and don’t want to learn from them?

Clients with this self-sabotaging approach to their investments are often unwilling to listen, are not open to new ideas or collaboration, and believe their opinions are the only ones that matter. As an advisor, these client traits may ring true for you.

Unfortunately, all advisors will experience such clients at some point. The key is knowing how to manage it in a way that provides a win/win solution to the client’s wealth creation options and maintains a healthy advisor/client relationship. Here are a few techniques to apply and to identify and challenge the self-sabotaging behavior of clients:

  1. Listen empathetically; remember the clients’ approach could stem from a lack of confidence around money, which to many is an emotive subject.
  2. Don’t let your frustration show; this is a client, not an adversary. Acknowledge what they are saying, as this engages and keeps them connected into the conversation.
  3. Remember, you are the financial expert, so get your facts straight, but be willing to listen to their investment suggestions and demonstrate your openness by offering to research on their behalf.
  4. Don’t allow the conversation to get away from you. Stay calm and focused. Most importantly, ask questions. Investors tend to get agitated by market volatility, perhaps unaware just how normal it is. The power of targeted questions can unravel some of this self-sabotaging behavior.

These techniques are more powerful when advisors have a level of information in advance of client meetings, as they can be tailored to each client’s uniqueness. Not only can financial personality be revealed, but perhaps more importantly, a guide to individually crafted questions is available to advisors so they can manage meetings based on revealed behavior.

Increasingly, the financial industry is turning to scientifically-based data gathering to prepare advisors, in advance of client meetings. Not only does this insight identify self-sabotaging behavior and provide direction on how best to manage it – it also delivers insight into:

  • Bias that can get in the way of investment strategy.
  • How to place clients more effectively at the center of the planning process.
  • Planning risks triggered by self-sabotaging behavior.
  • Issues, often hidden below the surface, that drive imperfect decision-making.
  • Risk propensity and risk tolerance that needs to be known and managed.
  • Whether the client sees their advisor as a financial coach and wants the relationship to be collaborative or Wants to delegate their financial decision making to the advisor and simply be kept informed.

Advisors who invest in scientifically based client discovery processes, understand that self-sabotaging behavior can come in many forms and that managing it must be approached on an individual basis.

Next time we’ll talk about things advisors need to know to better identify and assist this type of client, including how client behavioral insights empower advisors. In the meantime why not try our complimentary DNA Behavior Natural Discovery here.