Promote Financial Well-Being Through Behavioral Science

Promote Financial Well-Being Through Behavioral Science

This article first appeared on Nasdaq.

I find myself having more conversations about the application of behavioral sciences methodologies across industries, especially in the financial services world. Financial services leaders are wondering about behavioral science applications, how they work, the investment needed and how they impact, or not, their bottom line.

Given my vantage point at the nexus of behavioral science and the financial world, it is not a hard conversation for me to have. It’s encouraging to see how industry leaders are taking a hard look at the way they do business.

So much has changed in the wake of COVID-19, including remote work, staff losses and constantly changing business opportunities. These new circumstances are forcing industry leaders to review their offerings and strategic plans from a new position.

Integrating be-sci into the financial realm

Financial services firms still have a long way to go in delivering the level of customized experiences most clients require and expect. The financial executives I’ve been speaking with readily acknowledge such. But what they are missing so far is that unique behavioral insights – assuming they are reliably and objectively gathered – can have an enduring impact on a client’s financial well-being.

Simply put, a behavioral sciences methodology, starting with a financial personality discovery, delivers a deeper understanding of how people behave and make life decisions, especially about their finances. Without this specific insight, financial advisors are basing long-term planning decisions on: (i) observations learned in a few meetings, (ii) asking a limited range of questions which are usually biased to get desired answers, and (iii) demographic data or “persona category” information.

Extracting information about a client’s long-term plans is a key part of the advisory process, as “right data in, means right data out.” Importantly, advisors should have a holistic view of each client’s financial personality. In order to be able to advise, coach, and support a client through every life and financial event – especially the unanticipated ones – advisors should be accessing significant amounts of data about clients.

Without this depth of insight, the gap between financial advisors and their clients can become difficult, if not impossible, to bridge. Or both will proceed with sub-optimal strategies and solutions, which also means achieving sub-optimal outcomes, financial and otherwise.

With the application of behavioral science principles, financial services firms can deliver experiences that improve their customers’ financial choices and decisions, and therefore their overall wellbeing.

Don’t reinvent, partner with expertise

To return to those conversations with financial executives: Intentionally applying a behavioral sciences approach at first appears too big a leap for many financial services firms. In such cases, the common denominator is that they are not seeing the larger, value-added purpose. So, internal resistance to take-over.

It’s interesting how little is known about the use of behavioral science methodologies in organizations. Many assume they need to set up a full-scale in-house behavioral sciences team and build proprietary technology. Others trawl their staff to see who has a degree in psychology.

The reality is the use of an existing expert organizations to deliver these functions for you. The market now offers validated, scientific behavioral discovery and application systems to help advisors understand how clients make financial decisions, including under pressure (a crucial element). Further, using that data, such systems provide the keys to communicate and manage each client uniquely.

We’re living through a case study

Many practice managers and financial advisors forecast remote working continuing well into the future. And permanently in some cases. A valid concern is the loss of the “personal touch” of face-to-face meetings.

The gathering and robust deployment of financial personality data mitigates this loss. In addition to revealing insights about client decision making and communication style, their emotional trigger points are revealed. This enables advisors to best navigate tailored client solutions via platforms like Zoom, Skype, or GoToMeeting.

In-room feelings and intuition lost or missed can be replaced or improved through predictive insights about how the client will behave when triggered by market or life events. Advisors that quickly see a behavioral approach will focus the planning process on what the client truly needs and desires. Trust is accelerated via clarity and enhanced communication. Results improve and the process is more cost-effective.

Best: Behavioral insight delivers data that won’t change over time. Which means the data and insight placed in advisor/client hands can pay dividends in perpetuity.

The road ahead is paved with behavioral insights

Advisory firms that adopt a behavioral sciences approach are more likely not only to have better client outcomes, but also eventually earn a greater market share. One reason for that is, through expanded access to behavioral insights, many firms grow client services and practice management opportunities.

Examples of expanded Client Services opportunities through the lens of behavioral sciences: Individual Wealth Mentoring of Clients (Behavioral Coaching), Couple Dynamics, Family Succession Planning, Family Member and Employee Talent Reviews, and Planned Giving Strategies. Similarly, some Practice Management opportunities via a behavioral sciences “plug in:” Coaching Advisors on leading clients and customizing communications, Serving Clients in Teams, Hiring the Right Talent, Advisor-Client Match and Benchmarking, Behavioralizing Big Data for Customizing Communications, Investor Suitability Management based on Advisor and Client Styles, Rogue Identification, and Practice Succession Planning. The possibilities are actually endless.

These, again, are chances to improve the quality of the firm while also growing its revenues.

Making Behavioral Science Effortless in Workflow

Making Behavioral Science Effortless in Workflow

This article first appeared on Nasdaq.

When advisors and clients relate well and understand how to manage each other’s behavioral and communication differences, those solid foundations lead to repeat business and overall success.

Imagine heading to a meeting with a client and being able to use your smartwatch or other device to take a quick glance to remind yourself of their innate behaviors. Those revealed by the 10-minute assessment they took early in the advisory relationship.

You’d quickly refresh your knowledge of validated ways to best communicate with them. A smoother, more focused meeting. Perhaps quicker. And with improved outcomes.

Visualize knowing in advance, for instance, that this client values work-life balance and won’t budge from goals they have to support their lifestyle. Think about how important it would be to have access to client insights as you step out of the elevator and greet your client.

An insightful road map

Many of us can’t recall our own natural behavior when we are under stress, never mind trying to recall that of our client. But a quick glance at discovery report highlights provides these prompts:

You are motivated by out-of-the-box thinking and brainstorming. On the flip, your client who needs the big picture, action plans and logical key points.

You’re reminded to go into the meeting knowing how to manage the differences between you, including: Dial back your creative thinking and focus on the analytics and rationale, while remaining levelheaded
The world of advice is changing rapidly. Think back over the past few months and consider how often you’ve found yourself acting more as a coach-mentor than a financial advisor.

Robust info revealed in practical ways

Increasingly, and though they may use varying language to express it, advisors are inquiring how to foster this transition to coaching or mentoring.

All acknowledge their clients are smart and have a pretty good handle on their wealth creation in stable times. But they recognize we’re all a bit more emotional and not as consistent in decision making during tumultuous times.

My guidance: Get to know your clients’ natural behavior. It won’t change over time, but under pressure some aspects of their financial personality might cause a “behavioral flip” – so named by behavioral insights guru Hugh Massie – and will need to be managed. (Behavioral flip: Demonstrating behavior that seems to run counter to everyday, no-stress or low-stress behaviors.)

This is not some futuristic thought bubble; this behavioral insight is available now and can be used on any device via a simple integration. And that last point is one I get asked about a lot. Understandably, advisors are busy doing their core work and don’t need an add-on, for lack of a better term, if it’s not a quick and seamless process, including the time involved to get up to speed.

Leverage existing behavior data

Being able to reference and be guided by robust financial behavior data creates curiosity as clients see how empowered they are as they fully understand their inherent decision-making and communication style. This revolutionizes the advisor-client relationship and puts you and your client on the cutting edge.

Get an even better grasp on how to run a client meeting built on actual data and behavioral insight.

Understanding behavior satisfies know-your-client standards – without having to laboriously read piles of client bios – and ups the ante in terms of outcomes on all sides of the relationship.

Getting In The Way Of Our Own Financial Success

Getting In The Way Of Our Own Financial Success

This article first appeared on Nasdaq.

If we are to be effective in the decisions we make, we need to understand our uniqueness, our talent, our individual behavior and our personality. Without this insight, we are unlikely to make rational, wealth-growing financial decisions.

What gets in the way of our own success? Lack of self-awareness? Do we have a bias we are unaware of? Perhaps it’s because we do not know how or why we make the decisions we do. Or maybe it’s because we have no life plan or direction in life.

That’s what we call getting in the way of our own successes, whether financial or in life in general. So, expecting financial advisors to know how to advise us is a big ask. We are all unique, even though some of us might share similarities, we are all different in terms of how we respond to situations and make financial decisions.

Add to the mix a partner, and unless we and they devote time in to understanding each other’s communication, behavioral and decision-making approach, we simply have more confusion. More to decipher. I might add that the partnership dynamic is often a significant problem for financial advisors to navigate. Examples:

  • One party is results-focused; the other relationship-focused.
  • One wants the pension fund; the other the big house.
  • One wants to research and make the financial investment decisions without an advisor. The other needs guidance from an expert.
  • One is trusting and will go with whatever the advisor says. The other is skeptical and questioning and challenges everything they say.
  • One is comfortable taking risk; the other cautious and conservative.

Still, we often put our financial decisions in the hands of advisors who have absolutely no understanding of how to manage these our differences. Therefore, we make dumb decisions and get in the way of our own success. Not only that, if we make no attempt to be behaviorally self-aware, we will keep making the same dumb decisions and failing at our own financial success. I believe we make those dumb decisions because:

  • We lack self-worth.
  • We lack confidence.
  • We are too easily persuaded.
  • We are not growing in terms of understanding our behavior.
  • We don’t understand how to buy time out to consider our response to decision making.

Or perhaps we simply fail to consider the why of what we are doing. Why:

  • Am allowing other people to make financial decisions for me?
  • Have I not considered the significance of delegating these life decisions?
  • Is it that I’m accepting the decisions others are making about my life and circumstances?
  • Aren’t I making these decisions for myself?

Taking a step to gain insight into our inherent talents and behaviors ensures we are well equipped to understand how we make decisions. What should our life goals be? How and when and who to entrust with advising us? There are many quality behavioral data gathering processes that can be used. Be behaviorally smart and make sure you the advisor know yourself and, in turn, help your clients complete this discovery process. This will put you both on the same page. Your clients have a lot at stake and will appreciate the small investment of time it takes for you and them to best know how to help them. The vast majority of clients will find it at least enlightening and often fun.

Why not begin right now – try our complimentary DNA Behavior Natural Discovery here.

three professionals on couch

Uncover Employee’s Life, Moral And Core Principles To Inform Responsible Investing

This article first appeared on Nasdaq.

Lets go deeper on last months theme: Employee wellness and the role financial advisors should play in encouraging their corporate clients to establish employee wellness programs.

Advisors can enable their corporate clients to accelerate employee performance by introducing well-thought-out financial wellness programs. In doing so, employee productivity typically increases exponentially.

In fact, employee performance can be derailed when they are facing challenges or uncertainty in their lives. For instance, they see financial industry chaos, which can result in doubt and hesitation regarding their investments and other financial decisions. This uncertainty affects other areas of their lives, including work performance.

Aon Hewitt found that most employers (85 percent) say they are creating and adding financial well-being programs because it is the “right thing to do”. Another 80 percent of employers report that their programs are designed to improve employee engagement.

According to Aon Hewitt’s Hot Topics in Retirement and Financial Well-Being, “workers say they want their employer to provide them with the resources to help them obtain a more secure financial future, and it seems that employers are stepping up to this request.”

As financial advisors engage with their corporate clients and discuss the most effective wellness programs to introduce, focus should be on programs that ensure their employees gain confidence in understanding the role financial advisors have in delivering investment advice that lines up with life, moral and core principles.

Keep in mind that employees under financial pressure can cause significant issues to the business in terms of sickness, distraction, and more worryingly, potential rogue behavior. A more targeted approach to employees financial wellness – that includes going deeper into understanding their life goals – will undoubtedly reveal the most effective wellness program to introduce.

Working with corporate clients to introduce a financial wellness program that stands up to scrutiny and is based in integrity helps ensure and bolster an advisers reputation.

So, how should financial advisors advise their corporate clients on how to dig deep enough to reveal their employees financial and life goals?

Bearing in mind that many people do not have financial courage or awareness of their behavior around financial topics, leaders who, as a first step, avail their employees of a scientifically based discovery to reveal their life drivers and financial personality, will be ahead of the game in providing their employees with strong financial wellness programs.

Financial advisors should talk about implementing a financial wellness program that is more effective when leaders have a greater insight into their employees life goals, financial challenges and core principles. Armed with this information, leaders can more effectively evaluate the kind of financial wellness program to introduce. It also goes to the core of designing and implementing a rewards program.

Financial advisors who determine to engage their corporate clients in the financial wellness realm should themselves complete a natural discovery process to get a firsthand look at the deep information that will be revealed.

Financial wellness programs introduced in partnership with a quality behavioral insight tool helps employees ask the right questions of their advisors. They become aware of their tolerance for risk, how and what drives their financial decision making and where, if any, they need to manage their behavior in relation to their finances.

Further, within the business, employee conversations become more transparent around their finances. They will be more likely to seek help and support if they find themselves in a struggle. Better for the employer to know this and mediate a solution.

Financial advisors should ensure their corporate clients understand that when employees have a deeper awareness of themselves and their finances, it drives more appropriate behavior in the workplace as employees learn to line up their business performance with their financial well-being… that in turn aligns with their life plans. That is what delivers an empowered workforce.

To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email, or visit DNA Behavior


Markets Are Not Predictable, But Human Behavior Is

This article first appeared on Nasdaq.

Understanding how to uniquely manage each client during periods of market volatility is a major issue for advisory firms. So, when you have the capability to predict each client’s reactions in advance of market movements, communication is straightforward, understanding that markets are not predictable, but human behavior is. After all, mismanaged emotions destroy wealth.

In a down market, some cautious clients will panic about losses. On the other side, more extreme risk-takers will see it as an opportunity to buy. Prioritizing the management of clients based on market fear (or lack thereof) and providing corresponding key insights will develop more effective client relationships and retention.

Research demonstrates that markets cannot be predicted by advisors and investors. Instead, advisors should manage the behavioral biases of their clients. In fact, advisors are in an optimal position to do so.

Check yourself before you wreck yourself: Clients need to be part of the discovery process from the outset. This can only be achieved using highly targeted questions via an online discovery process, or verbally. Afterward, advisors can deliver advice based on the client’s goals, rather than the advisor’s perception or interpretation of client needs.

This leaves the advisor better able to align solutions and offerings to who the client is and what they are trying to achieve. It takes the advisors biases out of the conversation. Whether they are the personality biases or personal financial biases, the advice now becomes all about the client. Discovery upfront, as outlined here, delivers both a filtering and alignment that provides greater objectivity on the part of the client and advisor.

Emotional insight

Understanding and managing clients during market volatility is all about their emotional balance. If they are to achieve their goals, its important for the advisor to know how to stop them making silly decisions on their journey via emotion-based decisions or reactions to market movements.

This is where behavioral coaching and educating becomes such a big part of what advisors should be offering clients. Not every advisor, though, is going to have the skills necessary to coach clients in this way.

The use of a highly-validated discovery process that identifies and measures both inherent and learned behaviors will make advisors aware of clients who will react emotionally to triggers like disturbing media headlines or presidential tweets. Advisors with concrete insight can then best manage the client and their reactions for the best outcomes.

Having this insight on clients financial personalities delivers a more sophisticated set of tools into the hands of advisors.

Understanding the wiring and the whys

We humans have certain decision-making biases that are hard-wired early in life. These behavioral biases can be predicted, as they are inherently part of our DNA. The biases usually reveal themselves in times of higher market volatility, when a person is under more pressure or when a major life event takes place.

The key for investors is not to churn their accounts too much in times of volatility. For some advisors and investors whose DNA is wired to be fast-paced, overtrading will be a greater temptation.

As an investor, it’s important to know how much your account is actively managed. Active management can equate to overtrading and, in the end, could be costly or even destructive if not properly moderated.

The other bias to recognize is that investors have a much greater aversion to losses than gains. Those investors whose DNA is wired to be patient and risk-averse will feel the pain of losses much more; so, managing their emotions in times of volatility is crucial. These clients will need a portfolio that is very different from those that are higher risk-takers.

Advisors need to learn how to advise and communicate with each client uniquely in terms of their reaction to market volatility. Again, this is why advisors should consider using sophisticated, targeted questioning to gain insights into client behavior. Having predictive behavioral insight at the start of the client/advisor relationship is significant.

A customer-centric approach in all service industries is essential. But with the scrutiny and attention placed on the financial services sector, such customer focus becomes crucial to the reputation of the business, to client retention and to the overall success of the business. Further, it is a regulatory requirement.

Advice must now be tailored to the individual. One size does not fit all. Advisors who don’t get on board in terms of understanding the behaviors of their clients risk compromising their business and leaving themselves wide open to litigation.

Advisors no longer just need to know how they need to know why. Do you #KnowTheWhy of your client’s life and wealth creation goals?

To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email, or visit DNA Behavior.


Financial Advisors: Are You Ready To Embrace Artificial Intelligence?

This article first appeared on Nasdaq.

And the hits keep coming, so to speak. Never has every move, decision, and interaction with clients of financial advisors been analyzed to this degree. And that will only become more prevalent. Any form of questionable practice will be identified and challenged. It begs the question, are financial advisors ready to embrace artificial intelligence?

The use of Artificial Intelligence (AI) tools to monitor regulatory compliance is a conversation that is heating up, not just within financial services firms, but within regulatory agencies who are now considering both AI and machine-learning tools to enforce compliance.

This increased automation using AI focuses on Know Your Customer (KYC) rules, Anti-Money Laundering (AML) rules, and tax reporting.

AI isn’t all about policing the industry; its broader use can be used for financial advisors to analyze and understand how account holders spend, invest and make financial decisions, so they can customize the advice they give. The role of the financial advisor will change significantly as machines take over routine aspects of the service offering. The gap left is the key to improving the financial service.

Many organizations that deliver support to financial advisors recognize the importance of understanding people before numbers in financial planning. These organizations tend to be early adopters of AI.

Behaviorally smart financial advisors already use a validated scientific discovery process with their customers in advance of the first meeting. This measurable insight into the customer’s personality, the client’s communication style, risk patterns, decision-making approach, and reactionary market movement pressure points, is available at every touch point so clients can be managed honestly, openly and transparently.

The significance of revealing natural and instinctive financial personality and delivering targeted advice provides assurance, so advisors know the client at the deepest level – among other reasons, to mitigate compliance risks.

Information obtained from the use of an automated discovery process puts clients at the center of the financial planning process; matches advisory teams, clients, goals, and solutions; enables a customized communication approach at all stages of the client lifecycle; builds tailored portfolios; behaviorally manages client emotions; and enhances compliance and reduces complaints.

The financial industry is waking up to the use of AI. It is asking the right questions in terms of how it can add value to business models and satisfy regulatory requirements – thus demonstrating to a skeptical public that they are cleaning up their houses.

Like all technology, AI needs to be in partnership with humans. Financial advisors who use a validated financial personality discovery process work more effectively and efficiently by filtering key information from their client’s online personality profiles to inform the advice they give.

The danger is that too much focus is placed on the use of AI for detecting and analyzing brand sentiment or providing investment insights, even identifying rogue behavior – and yet missing the greater use: Getting to know the customer at a deeper level to deliver the best and most accurate advice.

The financial sector is, in a sense, being forced into this new world. Lack of trust, media and regulatory bodies sharpening their focus on compliance ensure the industry is rushing to find solutions that satisfy regulatory compliance, including staying within the bounds of the DOL’s new fiduciary rule.

Traditionally, a slow-adapter industry, the financial sector has been dipping its toe in the water in terms of using robo-advisors. Investors are drawn to this service as they no longer need to pay substantial fees for something they don’t want, need or in some cases get.

Artificial Intelligence used as a tool to put the client front and center of financial advice can and should be pursued. Technology that reveals below-the-surface information about clients will empower advisors to proactively engage said clients on what matters to them the most and on their terms.

Financial advisors, whether individual practitioners or part of a corporate organization, can no longer get away with pushing inappropriate product to investors. The customers are smarter, and the regulators clued in, so what is the smartest change to make to begin to get back the trust of customers? AI.

Get to know your customer at a deeper financial and personal level. Uncover what they want to do with their wealth. Build a relationship based on understanding their inherent approach to life, offering emotional support and becoming the go-to person when they make life decisions.

Much can and will inevitably be managed by AI automation, but most investors will want the human touch. An advisor who knows the importance of a quick phone call to a client when markets wobble or sending an interesting opportunity to an investor able to manage risk – these are the service touch points that maintain or help rebuild trust in the industry.

Financial advisors need to embrace artificial intelligence in general, and financial personality discovery tools in particular, if they are to stay ahead of the game, deliver more relevant offerings to the client and build long-term relationships.

Why not complete your own complimentary profile and see which behavioral biases may affect your financial decision-making. Click here.

To learn more, please speak with one of our DNA Behavior Specialists (LiveChat), email, or visit DNA Behavior.