Identify your client’s natural desires for making decisions. Their Natural Behavior.
Financial DNA Natural Behavior Discovery is the starting point for the world’s most reliable process for holistically uncovering a person’s financial personality. This step in the discovery process objectively uncovers the client’s natural instinctive behavior reflecting where they will be most comfortable making life and financial decisions over the long-term, and will “go to” under pressure.
We are different because of our questionnaire.
Our 46 question discovery process is what’s called a Forced-Choice Scoring Model and independent research found that its the best psychometric method for removing short-term situational bias. A key research discovery in building the Financial DNA system was that other risk profiles built on a Likert Scale model (rating scales with varying options measuring from most agreeable to least) lead to an over-inflation of the scoring which changes over time compared to the Forced-Choice Scoring Model. The Forced-Choice Scoring Model is the most accurate methodology for measuring natural instinctive behaviors.
Choosing an accurate and reliable behavioral finance questionnaire means that your clients are getting the most accurate measurement of their risk profile from a behavioral standpoint and that they only need to complete the 10 to 12-minute process once, whereas Likert Scale questionnaires need to be completed every six months to one year by the client.
What the questions look like:
The image above displays two of the 46 Natural Behavior questions. This process takes clients 15-20 minutes to complete and identifies client’s communication style, behavioral biases and risk profiles.
The potentially significant Risk Behavior Measurement Gap between the “Forced-Choice Scoring” approach and traditional models is highlighted below.
The diagram above dictates the measurement issues presented with Likert Scale behavioral finance risk profiles.
Advisor & Client Communication Styles
Research shows that financial advisors and their staff will only naturally engage 40% of clients.
Financial DNA helps advisory teams close the “Relationship Gap” with the other 60%. Knowing how to communicate with your prospects and clients from the very first interaction (phone call or meeting) over the lifetime of the relationship is critical to the sustainability of your business. Advisors use Financial DNA to uncover client communication styles and provide more frequent, meaningful and personalized communications.
Our reports and insights tell advisory teams how to modify their natural styles to create the ideal environment for their clients.
The image above shows two Financial DNA Report components available in the Financial DNA Summary Report. (left image) displays keys for financial advisors and their teams to create the ideal environment for clients. (right image) displays the Financial DNA compatibility matrix which shows how well financial advisors will naturally work with clients.
Behavioral Biases
Financial Behavioral Biases are deep-rooted patterns of investor behaviors which, if not managed, can cause a client to make irrational decisions on a regular basis. A recent Vanguard study found that financial advisors bring 150 bps of value by coaching investor clients to manage these behaviors.
To make this easy for financial advisors, Financial DNA measures each of these behavioral biases independently and displays them in the Behavioral Management Guide report. Financial advisors should discuss the strongest biases with the client and agree on a strategy for managing them.
The sixteen behavioral biases measured by Financial DNA are:
The image above is an excerpt of the Financial DNA Behavioral Management Guide and lists the sixteen behavioral finance behavioral biases measured by Financial DNA.
Risk Profile
Financial DNA connects the measured natural behavior and learned behavior risk scores based on population weighting to the overall risk profile which is used for building the investment portfolio. In the end, the financial advisor’s role is to determine the appropriate risk profile for the investment portfolio, but the Financial DNA platform makes it easy to align the client’s risk-taking behavior to their goals and financial capacity.
Accurately determining a client’s portfolio risk score is critical for long-term financial planning success and Finra Rule 2111 compliance. The Financial DNA reports provide a step-by-step approach to determining the portfolio risk score chosen for a client and document your selections.
The image shown above displays the step-by-step approach for determining a client’s overall Portfolio Risk Group.
Market Mood
Clients will react differently to the same market events. How will you manage your different client’s emotions as the market changes?
For the first time, advisors can predict the Market Mood of clients in real-time as the market changes. Market Mood puts customized communication keys at advisor’s fingertips to be more proactive in taking action and managing client’s behaviors.
Big Data meets Behavioral Finance. Market Mood tracks the stock market performance to predict the Market Mood of your clients.
Salesforce
Financial DNA App for Salesforce, the only behavioral finance application for Salesforce CRM.
The regulatory requirement for knowing your client and making suitable recommendations can be met by using Financial DNA to put a tailor made suit on every client. By communicating and serving every client in a more customized way will simultaneously grow relationships and minimize compliance risks.
