1. What does Financial DNA mean?

  • Financial DNA means all dimensions of a person’s financial personality for making life and financial decisions based on extensive behavioral finance research.
  • A person’s financial personality includes their communication and learning style, decision-making style, behavioral finance biases and also risk taking.
  • To learn more, please go to: https://financialdna.com/about-financial-dna/

2. What is the Financial DNA Discovery Process?

  • The Financial DNA Discovery Process is the formalized online system using independently validated assessment systems developed by DNA Behavior International for measuring a person’s unique financial personality.
  • The Financial DNA Discovery Process is comprised of 4 separate discovery processes that can be completed independently, and includes the related reports, interpretation tools, facilitation questions and implementation guides.
  • The 4 discovery processes are:
    • Communication DNA
    • Financial DNA Natural Behavior
    • Quality Life
    • Financial Personality

You can learn more about each discovery process at: https://financialdna.com/behavioral-finance-products/

3. How was the Financial DNA Discovery Process Developed?

  • The concept of Financial DNA was conceived in September 1999, and was first developed by DNA Behavior International for commercial use in April 2001.
  • The Financial DNA Discovery Process was developed by Hugh Massie and his DNA Behavior team with the assistance of a team of behavioral experts and psychologists from Georgia Tech University with over 100 years relevant experience.
  • DNA Behavior has developed its own technology systems which process the Financial DNA assessments and reports, store the data and provide facilitation features. This technology platform is known as the DNA Behavior Administration System.
  • To learn more, please go to: https://financialdna.com/about-financial-dna/
  • Detailed reports and background information on the development and validation of the DNA Behavior Discovery Process are available if you email us at inquiries@dnabehavior.com

4. Why was the Financial DNA Discovery Process Developed?

  • Financial DNA was developed to help advisors “know, engage and grow” every client for building enhanced relationships and unlocking potential.
  • What many people do not realize is the significant influence human behavior has on the financial planning process. Independent research shows that 93.6% of the financial planning process is the behavioral management of the client. To learn more, please visit https://financialdna.com/behavioral-finance-products/
  • A key first objective was to provide the advisors with greater self-awareness so that they could behaviorally manage their clients through different life and market events.
  • Our view is that Financial DNA is necessary to help the advisors build a client-centered business and provide more suitable recommendations. In essence, Financial DNA is a relationship based compliance system.
  • The source of greatest wealth creation for most people is the productive use of their talents and how they manage their emotional reactions so that wise decisions are made. Financial DNA provides the insights to help people live a Quality Life from the inside out, based on their financial personality. One of the primary barriers for many people is their relationship to money: for some they deal with the stress of having too much or inheritance, and for others they do not have enough money.
  • We did not believe the traditional risk profiling tools and personality based systems were adequate to achieve these objectives. Importantly, we recognized that in order to serve clients properly there needed to be greater understanding of their communication style and inherent decision making biases.

5. What are the benefits of using Financial DNA?

  • There are a number of ways to measure the value of implementing ROI.
  • The typical way is measuring the increased revenue from new clients (usually referrals) and gaining a greater share of the wallet.
  • Further, Financial DNA helps with client retention particularly knowing the spouses and family members.
  • There are also greater compliance benefits from enhanced suitability.
  • In addition, there are productivity gains from more quickly knowing the client, managing communication, reducing complaints.

6. Why is understanding client "behavior" important in driving plan adoption?

  • The key issue to plan adoption is understandability of the plan, trust in advisor and personal confidence…this leads to commitment
  • Clients need to understand who they are and advisors need to know themselves and know who different clients are
  • Behavioral finance -recognizes people are not rational in making financial decisions…however behavior can be predicted
  • Knowing the complete financial personality of the client (starting with natural behavior) provides a holistic picture of who the client is and all of their motivations for making decisions. A risk profile provides only a singular dimension of client behavior on a situational basis and is practically limited to building an investment portfolio
  • FDNA enhances the Advisor’s ability to see the world through the client’s lens and not their own.
  • Learn how to adapt to different communication styles and re-frame information using the client’s language
  • Know the emotional zones of the clients.
  • Gain a prediction of how the client will make life and financial decisions.
  • Enhance client management through the use of the behavioral insights.

7. What is the benefit of advisors using assessments?

  • Provides objective framework and leverages intuition
  • Intuition is not enough regardless of how sharp you may be
  • How we see ourselves shapes how we see others, and may not be consistent with reality of who the client is and how they see the world
  • Provides structured documentation of who clients are for suitability
  • Corporate memory for advisor and client transition events
  • Enables discussion on topics that may not otherwise come up
  • Accelerates engagement because the client has participated, and people like to talk about themselves
  • Clients feel appreciated because you are taking the trouble to know them
  • Helps in providing a customized experience to all clients using a consistent framework.

8. How do you get a client to complete an assessment?

  • The assessment should be presented as “discovery” not a psychological test
  • Use our template letter which positions the process as building an enhanced relationship and improving decision-making.
  • You can either send a URL link or have client complete it in the office while they wait for your appointment time.
  • Position your service as client-centered and your belief that managing client behavior is 93.6% of the financial planning process. Explain your desire to know your client and build a relationship.
  • Explain it can actually be fun to do.
  • It can help provide clarity as to the client’s long-term decision-making.
  • If all other clients are doing it and it is a standard part of the process, more people will take it.
  • Show them your report to demonstrate you have been on the journey: “knowing me-knowing you.”
  • If client doesn’t want to complete it, what does that tell you about the client?

9. Why is understanding "natural behavior" important?

  • Natural behavior is hard-wired and a person cannot change it on a permanent basis. It reflects the long-term core behavior of the client and how they make decisions. Natural behavior can be modified for temporary periods but it can be difficult to do for extended periods.
  • People revert to their instinctive behavior when under pressure caused by money and relationships since it is where they are emotionally comfortable.
  • Knowing the level of alignment between the natural and situational behavior of the client enhances client management.

10. How does an advisor effectively use the behavioral insights from an assessment to drive greater plan adoption?

  • It is imperative to treat the client uniquely based on the report feedback.
  • Ask the client if they agree with assessment outcomes, and how they wish to be served.
  • Then adapt..tailor the experience from creating the setting/environment to financial plan explanation (graphics vs. detail), use a television in meeting room to make it more tangible. For this purpose, the advisor can use a DNA Custom Meeting Guide which overlays their style to the client’s style.
  • The key is in meeting preparation and using the Communication DNA and Financial DNA reports.
  • It is important for the advisor to review the client fit. Are they an “ideal client?” Should someone else in the practice help with relationship management?
  • Integrate the behavioral data to a Behavioral IPS, which after discussion the client signs.
  • In addition, we have developed a DNA Behavioral Management Guide which is an advisor focused report that helps the advisor adapt and customize the client experience in the delivering the financial planning service.

11. How do you make the use of behavioral insights sustainable in an advisors practice?

  • The advisor and everyone on the team have to be committed to self-awareness by embedding this in the “culture,” company processes and the day-to-day activities.
  • If you match the advisory team to clients based upon their behavioral style, it will be easier for people to do which will make it more likely to happen consistently.
  • Integrating the behavioral styles into CRM and financial planning software will increase adoption by making it readily available in systems people use regularly.
  • Enforce a non-negotiable policy assessment used with every client.

12. How do you choose an accurate assessment system?

  • Using a Forced-Choice Model is more accurate than a Likert Model since Likert models use situational questions to which answers change over time. Forced-Choice models are more consistent over the long-term.
  • Assessments should have at least 25 questions for behavioral validity.
  • The discovery process should be independently validated with a rigorous psychometric process, and the documentation should be available for review. The CDNA and FDNA discovery processes have been through an extensive validation process. Contact us at inquiries@dnabehavior.com for more information.
  • Evaluate the clarity and relevance of reporting to financial planning, as well as, the ease for the client to understand it and discuss.

13. What is the key step for an advisor getting started with implementing a behavioral process?

  • First, as an advisor, you have to be committed to understanding and developing a client-centered business.
  • Realize that to engage and serve clients, you will need a way to quickly and accurately understand the underlying behavior, motivations and triggers that cannot be readily observed.
  • Recognize the importance of building your own self-awareness.
  • Everyone on the team, including the leader, should take their assessment to understand their own behavioral biases.
  • Build the discovery process into ongoing client engagement and management processes.

14. When does an advisor use Communication DNA (CDNA) and Financial DNA (FDNA)?

  • We recommend you use CDNA as soon as possible in prospecting phase so that you can customize the experience and interactions for them from the very beginning to help sign them as clients.
  • We recommend using FDNA once a prospect becomes a client who has contractually committed to the financial planning process.
  • The timing of when to have the client take the FDNA Discovery can be a personal preference as each advisor has a different engagement process.
  • We provide advisors with a Client On-boarding Process document to help them build CDNA and FDNA into their existing processes.

15. How do Compliance Departments of a Broker Dealer view the Financial DNA solutions?

  • Very favorably as FDNA measures risk tolerance and propensity, and helps you align solutions that are suitable to the clients goals and financial capacity. DNA Behavior can work with your Compliance Department to receive approval. The key is that FDNA or CDNA are not linked to performance returns.

16. I found taking FDNA/CDNA difficult because sometimes both words seemed to be most (or least) like me. Is that normal?

  • Yes, the profile is deliberately designed that way so it can extrapolate true instinctive behavior and, thereby, produce more accurate results. The Forced-Choice questions are also not situational in nature as they only require you to choose between phrases. FDNA is one standard deviation more accurate than other risk profiling tools.

17. What if the advisory firm cant embed a CDNA or FDNA URL link on their website for profile completion?

We have several ways that you can give a client access to take the Discoveries:

  • You can set up a self-registration URL that can either be embedded on your website, your documents or in emails.
  • You can set up the client yourself in our Admin system so that it goes straight to their email. They will just have to login with the ID And password provided to answer the 46 questions.
  • You can have them fill in a paper copy when can be set to us to score and enter into the admin system.

18. Does each spouse separately complete CDNA and FDNA?

  • Yes, each spouse or partner must individually complete the CDNA and FDNA Discovery Process. Then you a comparison report can be produced. The financial plan and investment portfolio can then be blended for the couple’s risk tolerance and propensity.

19. How is Financial DNA (FDNA) different to Finametrica and other risk discover systems?

  • FDNA was designed to holistically measure all dimensions of a person’s financial personality. This includes their communication style, life and financial decision-making style, behavioral (finance) biases and also their risk-taking. Our view is that in order to “know the client” ALL of these dimensions must be known. Each dimension of the client’s financial personality impacts the financial plan and investment portfolio in some way.
  • Finametrica only shows a singular risk tolerance score, and therefore does not measure financial personality.
  • Further, Financial DNA separately measures a person’s risk propensity and risk tolerance. Finametrica does not do this.
  • The FDNA Discovery Process uses the Forced-Choice Assessment Model for behavioral discovery that has been scientifically proven to be one standard deviation more accurate and produce non-situational results. Whereas, Finametrica uses the traditional Likert Scoring Model which inherently produces situational results.
  • FDNA was specifically designed to uncover a persons natural DNA behavior as this is hard-wired into the person, and where they revert to under pressure. This is more robust for building financial plans and portfolios that are sustainable for the long-term.
  • The FDNA reporting can be directly integrated into a Behavioral IPS.
  • FDNA couples comparison report allows you to manage the two different personalities usually found with couples. In addition, FDNA has family group and team reporting. Finametrica does not have the couple’s comparison reporting feature or for a broader family group or team.

20. How do you create and manage the planning process to allow for the differences in couples?

  • Some couples play the role of traditional male/female roles even when this is not their natural instinctive behavior. For example, the woman may be stronger, but lets the man be strong in the financial planning meeting. CDNA and FDNA helps you immediately uncover where the true power is in the relationship from making the decisions and the risk-taking.
  • Knowing that the spouses are different then enables the advisor to customize the communication and information flows to each using CDNA and FDNA.
  • Subject to knowing the financial circumstances of the spouses, a strategy often used is to segregate part of the plan to woman and man (‘ego’ money.)

21. How would FDNA have been used during the financial meltdown?

  • Both CDNA and FDNA would have been very valuable.
  • The client can answer situational risk tolerance questionnaires very differently when the markets are doing well! Financial DNA would have provided more reliable information.
  • CDNA and Financial DNA would have helped the advisors customize the delivery of bad news differently for each client so that more trust would have been developed, and potentially stopping the client making irrational decisions.
  • General guidelines are to build a portfolio plus or minus 10% of the recommended behavioral portfolio. If it is too aggressive for their behavior, they will be very nervous during the market fluctuations. But if too conservative for their instinctive behavior, then they will be unhappy with low returns.

22. When does the advisor use the Behavioral Management Guide in client meetings?

  • The bottom line objective of the Behavioral Management Guide is to allow the advisor to manage the client’s emotional responses to the market ups and downs without damaging the client relationship.
  • During your first client meeting:
  • A client walks into the door for your first meeting. You explain to the client that you use a discovery process called Financial DNA to uncover their overall financial personality. You invite them to complete the 15-20 minute process to uncover their risk profile and behavioral biases.
  • The client agrees to complete the process, you send the client a link to complete Financial DNA and the client spends 15-20 minutes answering the 46 Question discovery. The client immediately receives his/her FDNA Summary Report.
  • To prepare for the second meeting, generate the 5 Page Behavioral Management Guide for your client. Review your similarities and differences with the client (found in sections 1.1 and 1.2).
  • Next, review the Behavioral Biases for the client noting the strongest traits that a client has. For Chris Coddington (a Case Study example), one would note his strong Optimism and Over Confidence Biases.
  • Finally, note down the steps in section 1.4 these are the steps of introducing Financial DNA to a client.
  • Using section 1.4 as your guide, start to introduce Financial DNA to your client. Always… Always… ALWAYS start your meetings off with: “How do you feel about your report?” Rather than dictating to the client what their report indicators.
  • Remember, the point of Financial DNA is to deepen the relationship with the client and open up the discussion of their style, not for you to tell them what their style is reading from a report.
  • After discussing with the client their feelings of their Financial DNA style, start to introduce their behavioral bias and how that could influence their approach to investing (section 1.3) in context with their current financial situation and needs.
  • One tip that often resonates with advisors is to explain Financial DNA in their value proposition statement to the client. I suggest advisors using a line such as.. “You [the client’s] Financial DNA is your DNA, it’s not changing. Regardless of which advisor a you are working with your behaviors and the financial markets will be the same. An advisor that uses Financial DNA can predict these events and more proactively plan for the ups and downs that will inevitably come.”
  • Log into the DNA Admin System and populate the 4 levels of risk for the client based on their current financial situation. This will document your initial evaluation of your client’s risk profile.
  • Review your client’s Performance Keys in section A2: Your focus in preparing for the third meeting should be to create this environment for your client, to make them the most comfortable. Use the “Performance Keys” as this is the comfort zone for your client, they make the best decisions and are the most relaxed in this environment.
  • During the third client meeting you should be getting pretty close to preparing a financial plan for the client. It’s important at this stage to review the Final Risk Grouping that you have chosen for the client. You will use sections C4 and D1 for this with the client.

23. How does the advisor profile come into play with a client?

  • You can use what you know about yourself to modify your approach with a client. The DNA Behavioral Management Guide based on the FDNA report insights will help you with this.
  • If you start to talk in feelings and not go straight to bottom line with some clients, you will jeopardize the relationship up front. The reverse can be true too.
  • CDNA has a Custom Meeting Guide as well.

24. How many clients have used the DNA Discovery Processes?

  • Approximately 450,000 have used the Financial DNA Discovery Process (as of January 2015).
  • Approximately 200,000 have used the Communication DNA Discovery Process (as of January 2015)
  • Our 2021 goal is 1 million clients per year

25. How should we share our profile with the client?

  • You should absolutely share your profile with client so it is not a one-sided event. You can show how you are aware of your differences and consciously making sure you are adapting to their needs.

26. How do you jump from 46 forced-choice questions (FDNA Discovery Process) to the numbers in the portfolio allocation?

  • The 46 questions using 138 rating items produces approximately 2.4million scoring combinations that are population weighted using the bell curve. The scoring algorithms specifically calculate the clients risk-taking traits which lead
  • We take the population weighted average and put into a bell curve (based on behavior.)