Navigating Financial Personality: Understanding and Managing Behavioral Biases

Navigating Financial Personality
Understanding and Managing Behavioral Biases
www.financialdna.com
Featured Host
DNA Behavior – Financial DNA
• Leon Morales
Chief Relationship Officer
leon.morales@dnabehavior.com
www.linkedin.com/in/leondna
Leon Morales
• Tripp Rockwell
Chief Marketing Officer
tripp.rockwell@dnabehavior.com
www.linkedin.com/in/tripprockwell
Tripp Rockwell
Today’s Webinar
Objectives
• Define what are Behavioral Biases
• How Behavioral Biases impact Investor

decision-making
• How you as an Advisor can use this information

to help Clients achieve their goals
Portfolio or
Behavioral Management?
personality style
emotions passions
93.6%
of financial planning is 93.6%
excitement
listening
fear optimism
reaction
6.4%
Behavioral Management anxiety past experience Investments
Communication preferences
speculation confidence
opportunism
Source: The 93.6% Question of Financial Advisors, Meir Statman, 2000
Financial Personality
3 Components
Advisor Client
Communication
Financial
Personality
Risk Profile
and Goals and
Behavioral Spending
Biases Behavior
Clients Will React Differently to the
Same Market Events
Know Your Client
Your Fiduciary Role
Your ideal client

How to Communicate
Email, Phone, or Meeting?
+ more
Hard
Wired
Behavior Goals
Risk Profile
Loss Aversion And
Pattern Bias Spending
Newness Bias
+ more
Value Proposition
Behavioral Approach
Client Value: Firm ROI Value:
150bps1 50x2 ++ from

per year on AUM increased referrals,
retention and share
of wallet
Sources:
(1)The Advisors Alpha: Putting a Value on Your Value, Vanguard 2015 (2) Modelling based on Schwab RIA Survey 2015, Advisor Impact UK Research 2012
Quicker, More Reliable Method to Predict
How Will Clients React to Life, Business, Market Events?
Behavioral Finance Biases
Uncovered With Financial Personality Discovery
Behavioral Finance
Behavioral Finance is the application of psychology to financial behavior. The
premise is investors are not totally rational beings in terms of making perfect
financial decisions.
Irrational Improved
Investors Decisions
Financial Personality Discovery

A reliable prediction of how irrational financial decisions are made can be
obtained through objective financial personality discovery so that investor
behavior biases can be rationally understood and then managed as a
platform for making aligned decisions.
www.financialdna.com 10
Unique Personalities
Behavioral Biases and Natural Behavior
Fast Paced
• Consolidated View • Spender
• Over Trading • Herd Follower
• Optimism Bias • Instinctive
• Risk Taker • Status Quo
Relationship
Orientated
Orientated
Results
• Saver • Risk Aversion

• Mental Accounting • Loss Aversion
• Pattern Bias • Fear of Regret
• Benchmark Focus Moves Carefully • Disposition Effect
Specific Measurement of Behavioral Biases
Each Person Has Some Level Of Each Bias
Chris Coddington
Cooperative Take Charge
Outgoing
Reserved
Fast Paced Patient
Spontaneous Planned
Skeptical Trust
Content Pioneer
Cautious Risk Taking
Anchored Creative
Connecting Financial DNA Natural Behavior Factors
to Behavioral Finance Biases
Chris Coddington
Disposition effect Consolidated View
Mental accounting Herd follower
Over trading Loss aversion
Instinctive Pattern bias
Controlling Fear of regret
Status quo bias Optimism bias
Risk aversion Over confidence
Benchmark focus Newness bias
Chris Coddington
Strategist
P o w e re d b y DN A B e h a vior®
Financ ial DNA® Natura l Be havio r Dis c o ve ry

Financ ial Tale nt DNA Re po rt fo r:
Chris Co dding to n o n 14-Mar-12

Pro vide d b y yo ur a dv is o r: Chris Co dding to n

Your Natural Financial Planning Approach to Closing the Behavior Performance Gap for Building a
Quality Life

Pe rfo rmanc e Ris ks Pe rfo rmanc e S uc c e s s Fac to r

Propensity to Take
98% 2% Safely Manages Risk
Inappropriate Chances
Likelihood to be Emotional
1% 99% Risk Tolerance
With Losses
Can Lack Boundaries 2% 98% Bottom Line Results Focus
May Set Overly Ambitious
99% 1% Builds a Content Life
Goals
Can Easily Change Plans 4% 96% Pursues Goals
Tendency to be Financially
31% 69% Follows Budgets
Disorganized
May Have a High Desire to
8% 92% Saves Money
Spend
Can Lack Attention to Detail 5% 95% Researches Information
May Not Listen Carefully 99% 1% Relationship Driven
May Take Control of
93% 7% Delegates to Advisor
Decision Making
Build o n yo ur natural pe rfo rmanc e s uc c e s s fac to rs and minimize yo ur pe rfo rmanc e ris ks
with wis e advic e and we alth me nto ring .
Your Financial Planning Performance Success Factors Relative to the Population
Your Financial Planning Performance Risks Relative to the Population

This Financial DNA report provides a high level summary only of your natural behavioral strengths and struggles for
financial performance with limited explanation. It is not intended, nor is it suitable for making life, financial and investment
decisions in isolation. Should you require additional explanation and/ or resources please request access to our more
detailed Financial DNA reporting. Before making any life, financial or investment decision, we recommend that you seek the
wise counsel of a wealth mentor or advisor.

Page 1 14-Mar-12 Chris Coddington - Strategist © 2016 DNA Behavior International ID#26380
Chris Coddington’s
DNA Ultimate Performance Guide
Items from the Top 2

Factors:
Factor 1 –
3 Strengths,
2 Struggles,
3 Performance Keys
Factor 2 –
2 Strengths,
1 Struggles,
2 Performance
Keys
Carol Benjamin
Relationship Builder
Financ ial DNA® Natura l Be havio r Dis c o ve ry

Financ ial Tale nt DNA Re po rt fo r:
Caro l B e njam in o n 04-Oc t-11

Your Natural Financial Planning Approach to Closing the Behavior Performance Gap for Building a
Quality Life

Pe rfo rmanc e Ris ks Pe rfo rmanc e S uc c e s s Fac to r

Propensity to Take
76% 24% Safely Manages Risk
Inappropriate Chances
Likelihood to be Emotional
82% 18% Risk Tolerance
With Losses
Can Lack Boundaries 97% 3% Bottom Line Results Focus
May Set Overly Ambitious
58% 42% Builds a Content Life
Goals
Can Easily Change Plans 46% 54% Pursues Goals
Tendency to be Financially
92% 8% Follows Budgets
Disorganized
May Have a High Desire to
73% 27% Saves Money
Spend
Can Lack Attention to Detail 76% 24% Researches Information
May Not Listen Carefully 27% 73% Relationship Driven
May Take Control of
14% 86% Delegates to Advisor
Decision Making
Build o n yo ur natural pe rfo rmanc e s uc c e s s fac to rs and minimize yo ur pe rfo rmanc e ris ks
with wis e advic e and we alth me nto ring .
Your Financial Planning Performance Success Factors Relative to the Population
Your Financial Planning Performance Risks Relative to the Population

This Financial DNA report provides a high level summary only of your natural behavioral strengths and struggles for
financial performance with limited explanation. It is not intended, nor is it suitable for making life, financial and investment
decisions in isolation. Should you require additional explanation and/ or resources please request access to our more
detailed Financial DNA reporting. Before making any life, financial or investment decision, we recommend that you seek the
wise counsel of a wealth mentor or advisor.

Page 1 04-Oct-11 Carol Benjamin - Relationship Builder © 2016 DNA Behavior International ID#37094
Recognize How Behavioral Biases Influencing Risk Taking
Manage the Overall Impact of Biases
Financial
Can Over-Influence Can Increase Risk -
Caution Personality Risk Taking
Disposition Effect Consolidated View

Mental Accounting Herd Follower
Loss Aversion Over Trading
Pattern Bias Instinctive
Fear of Regret Controlling
Status Quo Basis Optimism Bias
Risk Aversion Over Confidence
Benchmark Focus Newness Bias
Need to Increase Need to Manage

Decision-Making Expectations
Confidence Down
Financial Personality Insights
Risk Propensity and Tolerance
Suitability Requires Consideration of Many Risk Factors
The Key Elements of Financial DNA Risk Profile Discovery
Key Investment Risk Terminology Definitions FDNA Natural Behavior FDNA Financial Personality
Elements Discovery (Level 1 – Discovery (Level 2 – Learned
Automatic, Instinctive) Situational Behavior )
Risk Need Risk required to meet financial FDNA IPS +Financial Planning FDNA IPS +Financial Planning
goals Software Software
Risk Capacity Financial ability to endure the risks FDNA IPS +Financial Planning FDNA IPS +Financial Planning
of portfolio losses Software Software
Risk Propensity Willingness to take risk Yes Yes
Risk Tolerance Willingness to live with losses Yes Yes
Loss Aversion Maintain investments in down Yes Yes
markets and not crystalize losses
Risk Composure How client will behave in a crisis FDNA Market Mood Yes - Financial EQ
Risk Perception/ Judgement about severity of risk in Inherently not measured as Inherently not measured as
Product Perception current climate client gut feel client gut feel
Risk Preferences Personal evaluation of risk No Yes
preference
Risk Profile Aggregate of the above factors for FDNA IPS + Client FDNA IPS + Client Conversation
achieving goals Conversation
How to Interact with Clients
Adapting to their Natural Behavior
Ultimate
Performance Guide
Advisor and Client

Compatibility Matrix
How Will You Manage Client Emotions
in Volatile Markets?
Behavioral Finance
Resource Tour and Monthly Features
http://financialdna.com/behavioral-finance-resources/
• Our focus here at DNA Behavior in 2017 is “active engagement of

the client”. In order to truly provide a fiduciary role an Advisor
needs to know their client.
• In the USA our governing body FINRA and the DOL are moving in
that direction to strengthen the active engagement to ensure that
clients are receiving suitable guidance.
Financial DNA® for Financial Personality Insights
Using a Behavioral FinTech Platform
A Tailor Made Suit for Every
Client
Since 2001, we have been
providing financial services
businesses worldwide with a
single cloud-based “FinTech”
platform which delivers
practical and scalable
behavioral intelligence
solutions to “Know, Engage
and Grow” every advisor,
employee and client online for
the building of a client-
centered business which
delivers high performance.
The Science Behind
“Swiss Watch” DNA Systems
60+ Man Years
of
Development
Investment
Since 2001
Forced Choice Independent
Assessment Validation by
Measuring 64 Team with
Behavioral 100+ Years of
Traits Experience
Powerful and
Unique Client
Centered
Behavioral
Solutions Delivered
in 123+ Countries
and 11 Languages
Questions?
Contact Us
For more information about Financial DNA
Contact:
DNA Behavior International
5901-A Peachtree Dunwoody Rd
Suite 375
Atlanta, GA 30328
(770) 274-0311
Leon.morales@dnabehavior.com
http://financialdna.com/trial-leon-morales/
• Please follow us on Linkedin at Financial

Personality Insights and/or Financial DNA on
Twitter
• Purchase Behaviorally SMART Financial Planning

on Amazon

Navigating Financial Personality: Understanding and Managing Behavioral Biases

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Navigating Financial Personality

Understanding and Managing Behavioral Biases

• Define what are Behavioral Biases

• How Behavioral Biases impact Investor

• How you as an Advisor can use this information

Source: The 93.6% Question of Financial Advisors, Meir Statman, 2000

Your ideal client

Client Value: Firm ROI Value:

150bps1 50x2 ++ from

Financial Personality Discovery

• Saver • Risk Aversion

Fast Paced Patient

Cautious Risk Taking

Mental accounting Herd follower

Over trading Loss aversion

Instinctive Pattern bias

Controlling Fear of regret

Status quo bias Optimism bias

Risk aversion Over confidence

Benchmark focus Newness bias

Financ ial DNA® Natura l Be havio r Dis c o ve ry

Can Lack Boundaries 2% 98% Bottom Line Results Focus

Can Easily Change Plans 4% 96% Pursues Goals

Can Lack Attention to Detail 5% 95% Researches Information

May Not Listen Carefully 99% 1% Relationship Driven

Items from the Top 2

Financ ial DNA® Natura l Be havio r Dis c o ve ry

Can Lack Boundaries 97% 3% Bottom Line Results Focus

Can Easily Change Plans 46% 54% Pursues Goals

Can Lack Attention to Detail 76% 24% Researches Information

May Not Listen Carefully 27% 73% Relationship Driven

Disposition Effect Consolidated View

Need to Increase Need to Manage

Advisor and Client

• Our focus here at DNA Behavior in 2017 is “active engagement of

• Please follow us on Linkedin at Financial

• Purchase Behaviorally SMART Financial Planning

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