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Do We Really Know Our Financial Selves?

financial behavior, risk profiling, risk tolerance, financial researchWith the progress of technology we have got used to instant gratification. We use the internet to research whatever grabs our immediate attention and we use social media to pass this information on. Similarly Reality TV has become a staple in many peoples everyday activity ? they watch it, they talk about it and they share commentary through social media. Whether we like it or not short term focus is the order of the day. And maybe it shouldnt be. Longer term perspectives and rational thinking to focus on what is really important is becoming harder to do, especially if you a trend follower of one sort or another.

Nowhere is this more obvious than in the area of personal financial matters.

Every so often, stock markets crash. Technically this should always start with economic reassessment but more often than not such falls get exaggerated by investor overreaction to the information at hand. Sometimes investors think that If everyone is selling the market then I should as well Such following of the herd, so to speak, is quite common and is fed primarily by the financial media. Nothing sells like a bad story ? Markets have fallen by xx%. investors fleeing the market and so on.

Once markets bounce back, you will rarely see anything similar in media coverage terms to the upswing. It isnt traumatic or sensational enough to grab our attention. This herd mentality to aversion is usually fed by instinctive reactions of investors where especially in adversity we tend to make decisions quickly and emotionally. But not rationally.

But of course once shares are sold, the financial position is crystallized. Then, as it is wont to be, the market creep back up happens almost anonymously in dribs and drabs. A quarter of percent here, half a percent there and before you realize the market occasionally jumps by one or two percent in a day. The losses have been reversed and so a wealth accumulation opportunity has been lost out on. Blink and youve missed it.

The financial media can also appear to provide expertise. In the US there are no shortages of financial pundits who will expound the virtues of particular stocks or investment strategy, so much so that they are almost entertainment in their own right so outrageous are some commentators statements. This can lead viewers to become over confident, thinking that they can be more successful at investing than they really can. Hand in hand with this is an optimism bias and an exhilaration got by investing in a certain way even if they know it is difficult to be successful.

behavioral finance, risk profile, financial dna, risk tolerance, investment riskOver the years I have got plenty of client phone calls in times of market turbulence but thankfully these numbers have become less and less as time moves on. This reducing number isnt due to a reducing client bank ? we have tripled the amount under advisement in the last five years ? it is due to our emphasis on making clients understand themselves first and then the markets second. Client behavioral education is a keystone of our approach in advising clients. If people appreciate themselves and their deep rooted financial preferences they can then make informed choices about the issues that they can control rather than those they cant, namely the reactions of others to stock markets.

By focusing on their own needs which are usually long term rather than the short term noise of financial media real benefits accrue. Market rises arent missed out and additional trading expenses arent incurred. Patience and calmness are real virtues that are often overlooked and undervalued.


Eamon is a Human Behavior integrator at DNA Behavior, and one of Irelands leading independent fee based financial planners. His single goal is to help clients make wise decisions with their money now and for the rest of their lives especially in the areas of investing and retirement planning.

Visit the DNA Behavior website to learn more about managing financial behavior and risk through greater self awareness.

Are Women More Risk Averse Than Men?

Very often the point is made that men and women are different. In the area of investment risk taking, some research suggests that women are more risk averse. Some of this research is referenced in the first of BlackRock’s three-part blog series on gender differences, Men vs. Women: Risk Aversion.

The first point is that the behavioral research generally shows that the structure of men and women’s brains is different to some degree.? Then add the significant physiological differences. This is why it has been said that “Men are from Mars” and “Women are from Venus”. The differences can be reflected in very different beliefs, values, attitudes including to taking risks.

I would like to clarify the difference in terms of risk taking more from the stand point of our DNA Behavior research, which has been independently validated. Our DNA Behavior research shows that the natural instinctive behavior of men and women is generally the same. That is based on natural behaviors as many men will take risks as women. This will be their decision-making starting point. The research is true of other behaviors such as taking charge, being outgoing or social, being empathetic, goal driven or creative. The fact is that there are women out there whose first instinct is to take risks. Similarly, on the other side, there are an equal number of men and women who are instinctively cautious. Again, there are men out there who by nature do not take risks.

However, it is also important to recognize the influence of “learned” behaviors on a person’s personality development or evolution. This is where the substantial differences between men and women can arise because they do have different values and attitudes coming from the differences in how their brain’s are structured and the physiological differences. For instance, what we see is that a woman may be naturally (instinctively) a risk taker but her nurturing attitude to protecting the family will kick through and lead to cautious behaviors. Or, in the case of another women she may be born cautious but have to at times take risks to generate income and capital for the family. But, there will still be an overriding careful attitude to it.

The main point here is not to automatically assume all women will be naturally more risk averse than men.

The same point is true for advisors who think that the men make all of the decisions in doing the financial planning. In some cases the man may lead the process as head of the household and bread winner, but he may not be the power player in making decisions – the women may be far more take charge and direct the decision-making.


Hugh Massie is a Human Behavior Strategist, successful entrepreneur and a leader of the “behavioral awareness” revolution in businesses worldwide for unlocking human potential. He has 26 years of unique and diverse international experience in developing client centered human behavior solutions.


Visit the Financial DNA website to learn more about helping couples improve financial and life decisions through an enhanced relationship with money.

Product Release Notes: DNA Admin System Update October 25th, 2013

The following features and updates have occurred at October 25, 2013 between 2:00am US Eastern Time and 5:00am US Eastern Time.

Behavior Highlights button on Client Detail Page:

A marketing theme we have recently adopted is DNA Behavior, putting behavior at the fingertips of your business with this feature we have quite literally achieved this. With one click of your mouse, you will now get the high level overview of a clients Communication DNA and or Natural Behavior results. This is now the quickest way to see key details of a client or employees behaviors such as: Risk and Decision Making Groups and scores, 2 strongest factors and Primary and Secondary Communication styles with the Communication keys.

This feature will be made available automatically to every account inside the DNA Administration System.


Financial Talent DNA Comparison Report:

Compare 2 individuals behaviors in a one page Financial DNA Talent report format. Often referred to as a couple overlay report, this report is the quickest way to compare the behaviors of 2 individual on 1 easy to use page.

To familiarize you with the DNA Talent Report format, we recommend reviewing the interactive Financial Talent DNA Report walkthrough for the individualized report: Available here.

Contact support@dnabehavior.com to have this feature turned on for your account.

Communication DNA Group Report:

What percentage of your clients are goal-setting focused compared to information focused?

The new Communication DNA Group Report provides managers with the information they need to review their entire customer base and employee bases communication style. This new feature inside the Facilitation Tools menu allows managers to produce a report in summary format of an unlimited amount of individuals behaviors.

Contact support@dnabehavior.com to have this feature turned on for your account.


Russian Language released for Financial DNA Natural Behavior:

We are pleased to announce that Financial DNA is now available for the Russian Language. Included in this launch are the 5 page Financial DNA Summary and 1 page Financial Talent DNA Reports.

This feature will be made available automatically to every account with access to these reports inside the DNA Administration System.


Updated instructions for the Communication DNA Discovery Process:

We continuously review feedback on the questionnaire process from our users. In this product release, we are implementing some of this feedback to make the discovery process more clear and easy for the participant to complete. Below are the updated instructions for Communication DNA.

The Communication DNA Discovery Process provides detailed insights into your communication style and your preference for how you wish to be communicated with by others.

  1. Directions: This is an assessment, not a test. Therefore, there are no right or wrong answers.
  2. Please respond quickly on the basis of how you wish to be communicated and interacted with by other people. Avoid agonizing over your choices.
  3. From each group of three phrases (with background pictures), choose the one option that indicates how you MOST like to be communicated and interacted with by selecting the button below this option marked Most.
  4. Then choose the option that indicates how you LEAST like to be communicated and interacted with by selecting the button below this option marked Least.
  5. REMEMBER: In each group you should select only one Most, one Least and leave one phrase unmarked.
  6. The key to an accurate assessment is YOUR willingness to be realistic about your communication style.
  7. Work quickly by yourself without help from others. Avoid agonizing over your choices. At times you may find some of the choices difficult. This is the intention as it will lead to a more accurate and reliable reporting of your communication style.
  8. Allow up to 5 minutes to complete this assessment.

Updated instructions for the Natural Behavior Discovery Process:

We continuously review feedback on the questionnaire process from our users. In this product release, we are implementing some of this feedback to make the discovery process more clear and easy for the participant to complete. Below are the updated instructions for Natural Behavior.

  1. Directions: This is an assessment, not a test. Therefore, there are no right or wrong answers.
  2. Please respond quickly on the basis of your natural instinctive behavioral traits regardless of whether you consider them good or bad.
  3. The focus should be on who you are and not on who you want to be or who you believe you have become in specific life, workplace, family, community or financial settings. The key to an accurate assessment is YOUR willingness to be realistic about your natural behavior.
  4. From each group of three phrases, choose the one phrase that indicates how you MOST naturally like to operate, make decisions and interact with others by marking the box next to the word under the heading Most.
  5. Then choose the one phrase that indicates how you LEAST like to operate, make decisions and interact with others by marking the box next to the word under the heading Least.
  6. REMEMBER: In each group you should select only one Most, one Least and leave one phrase unmarked.
  7. Work quickly by yourself without help from others. Avoid agonizing over your choices. At time you may find some of the choices difficult. This is the intention as it will lead to a more accurate and reliable reporting of your natural behavior.
  8. Allow up to 15 to 20 minutes to complete this assessment.

Contact support@dnabehavior.com to learn more about these features and others in your account.

The Importance of People Centered Leadership in the Financial Industry

Our leaders are too involved in understanding/unraveling complex regulatory issues to spend time leading…

In many parts of the world financial regulators are placing more and more constraints on the industry. From improving record keeping in terms of recording advisor/client conversations to alerting the industry about the need to understand client behavior over and above tolerance to risk; and many other change requirements in between. Add to this a far savvier client base and leadership may well find itself with no time to support advisors or even navigate the business through these complicated seasons.

But – the financial landscape is shifting – it’s all about communication and understanding advisor and client behavior. Today’s leaders are crafting a new and innovative direction for the financial industry.

Jackson was looking for something different in the financial industry; something edgier, something to raise his passion for the business

At this current interview he was asked to complete a behavioral discovery process (profile) customized for financial services. When completed the interview panel openly shared the outcomes in their behavioral reports with Jackson and the interview process began.Leadership in the Financial Industry

No reference was made to his credentials, his previous experiences, his challenges. All of that information could be found in his resume. The questions the panelists asked were customized to his behavioral style and pointed to his hopes of his future, how he would expect the leadership to serve him in terms of fulfilling his expectations for his career path.

They clearly knew from his behavioral report that he was strategic, driven and would undoubtedly have plans for his career path.

Jackson found himself fully engaged in what was now a conversation focused on what they as a business could do for him rather than what he could do for them.

As the interview process drew to a close the panel asked Jackson to comment on the way they had conducted the discussion. He responded that it was very different and he found himself responding to their questions by opening up areas of his life, his future plans, his preferred style of communication and so much more than he had ever intended.

The panel concluded by telling Jackson that this approach mirrored the way the company provided financial advice to their clients.? This approach was all about understanding the clients hopes, dreams, plans for their future in terms of their finances and then lining up advice and support that worked in partnership with them to achieve these goals.?? This approach set a platform to ask revealing questions to uncover and deliver real insight into the advisor/client relationship.

The leadership of the company did not believe in containing creativity and initiative with their advisors; they believed in harnessing behaviors and talents and matching them with clients so that relationships could be formed that not only lasted but also provided well targeted advice that delivered outcomes, built trust and formed strong client/advisor partnerships.? They also saw this approach as one that would deliver the advisors vision for future and thus ensure they retain high quality staff.

Not surprisingly Jackson chose to work for this company.? The leadership had crafted a meaningful vision; one he knew lined up with his own personal passions.? Six months later and Jackson has fully embraced this style of working with clients. His clients see completing a profile as a useful “icebreaker” and feedback has demonstrated their support for the process and their belief that the advice they are being given genuinely focuses on their personal strategies for their future and how best to create wealth to deliver these plans.

Learn more about adopting a people centered leadership approach – click here.

White Paper: Blind Spots in the Financial Advice Process

Every financial advisory firm has a client planning process which it considers to be sound. However, it is likely that the process will have one or more key areas that are missing or are not being adequately executed with the appropriate systems.

In raising these blind spots we fully recognize that there is an inherent tension between enhancing client engagement, which boosts revenues, and compliance, which protects the business. Our recently released Blind Spots in the Financial Advice Process white paper serves to highlight these blind spots that your firm should be aware of, and then recommended actions to consider.behavioral finance, financial planning, blind spots, home office goals, client behavior, financial personality

Where are the blind-spots in your firms current advisory process causing this gap?

Read the Executive Summary to the White Paper

Download the Blind Spots in the Financial Advice Process White Paper

Regulator Getting Into the Minds of Consumers

During the past 10 or more years the field of behavioral finance has been gradually moving from theory and sporadic discussion to a more main line topic with increasing attention in the last few years being given to its practical application in every day consumer decision-making around financial products and solutions.

Now, behavioral finance has been given a significantly increased level of importance at a practical level with the UK regulator publicly expressing its views. In this regard, the Financial Conduct Authority in the UK has recently issued Occasional Paper No. 1: Applying behavioural economics at the Financial Conduct Authority – Click here to view the paper.

behavioral finance, financial regulator requirementsClearly, this paper signifies that the UK regulator will be taking a greater behavioral finance direction in its overseeing of financial services. The subject of human behavior in financial services can now progress past investment risk profiling to knowing all of the behavioral biases that a consumer has in making financial choices, and relating those to product suitability.

The paper details the need for advisors to get deeper into the minds of consumers for helping them manage their behavioral biases to reduce mistakes and also mitigate the mismatch between a products declared function and the consumers actual use. More specifically it points out how advisors and clients are mostly blind to their biases and mistakenly trust their intuitions. Even advisors familiar with different type of biases find it difficult to spot how their biases affect a particular decision. In effect, the paper highlights the need for understanding the broader financial personality at a deeper level which is the inherent foundation of Financial DNA. This goes beyond the traditional risk profile which is singular in nature.

The question is how long will it before other regulatory authorities go down a similar path? Given the increased focus of regulators around the world on product suitability it may not be that long. The UK regulator in the past few years has been a clear leader with others looking to what they do.

What does this mean for advisory firms? In essence, firms will have to revisit their advisory processes particularly in the area of knowing the clients behavior. There are existing regulations and compliance obligations for knowing the client and product suitability. However, firms will have to do a lot more in their discovery work in the future to meet what will be increasing regulation and oversight in this area. Perhaps, it is time for firms to start preparing now? Our experience, is that firms who provide a great discovery experience are able to enhance client engagement. So, whilst the behavioral approach of the regulator may seem like a burden it can be converted to a sustainable revenue opportunity through greater client engagement.

To learn more about how the different behavioral biases of each investor and advisor can be discovered using an independently validated process, please visit the Financial DNA website.