fdna behaviorally smart goals based planning · 2017-09-16 · centered business which is ......

www.financialdna.com

FinancialDNA®BehaviorallySMART™ Goals-BasedPlanning

HughMassieCEOandFounderofDNABehaviorInternational

BehavioralFinanceStrategistPioneerofFinancialPersonalityDiscoveryFundManagerWealthMentorBoardMemberAuthorofFinancialDNA®

Hughadvocatesfocusingonmanagingtheemotionalaspectsofdecision-makingtoimprovefinancialplanningperformance.

FinancialDNA®DeliveringFinancialPersonalityInsights“Behavioralizing”FinancialPlanning

Matchadvisoryteams,clients,goalsandsolutions

Since2001,wehavebeenenhancingthecapabilityoffinancialservicesbusinessesworldwideto“know,engageandgrow”millionsofinvestorsbythedeliveryofuniqueFinancialDNAbehavioralfinanceinsightsdatausingourscalablebehavioralfintech platform.

Theprovenoutcomeisaclient-centeredbusinesswhichiscompliantandout-performs.

“TheNewWorldCulture”forAdvisorsHowWillYouPutClientsattheCenterofthePlan

ProductsOfferingsBasedonPersonaModelAssumptions

TailoredGoals-BasedPlanningUsingFinancialPersonalityInsights

CustomizedBehavioralCoachingPoweredbyaFinTech Platform

Source:The93.6%QuestionofFinancialAdvisors,MeirStatman,2000

93.6% 6.4%

personality styleemotions passions

reaction

excitement

opportunism

Communication preferences

listening fear optimism

anxiety past experience Investments

speculation confidence

Goals-BasedFinancialPlanningPortfolioorBehavioralManagement?

93.6%offinancialplanningisBehavioralManagement

DNABehavioralizes MoneyforAdvisorsandClientsPredictingPlanningRisksTriggeredbyBehavior

FinancialPersonality Money

Emotions

BehavioralResponsesDrivingDecision-Making

Goals-BasedFinancialPlanning ObjectiveBehavioralManagementistheFoundation

1.Strategicallybuildagoals-basedplanreflectingtheclient’s:(i)Purpose-basedgoals,and(ii)Investmentriskprofilebasedontheir(a)financialabilitytotakerisk(capacity)and(b)willingnesstotakerisk(riskpropensity,toleranceandlossaversion).2.Then,behaviorallyguidingtheclientonthejourneytoachievingtheirgoalsbyhelpingthemmakesounddecisionsduringtheupsanddownsoflifeandmarketevents.

TheFinancialPlanningRiskforClientsAchievingGoalsorDesiredAfter-TaxReturns?

1. Thebiggestfinancialplanningriskisclientsnotachievingtheirgoalsinthedesiredtimehorizon;notmarketvolatility.

2. Thekeyisforclientstoalwaysbeemotionally-calmwhenmakingkeydecisions;“checkyouremotionsbeforeyouwreckyourself”.

3. Definepurpose-basedgoalsbasedonneedsandwantsfortheshort,mediumandlongtermtohavegreateremotionalcommitment.

NaturalBehaviorAwareness:• Left-braininvestorswillbemorereturndriven• Rightbraininvestorsaredrivenbylifestability

Suitablewealthcreationstrategiesbasedonpurpose-basedgoalsalignedtowhotheclientis

CommunicationStyle+FinancialPersonality

QualityLifeGoals

FinancialPlan

DiscoveryProcess

Managingexpectationsforcommittedlongtermdecisions

TheFinancialDNADiscoveryProcessHolisticClient-Centered Methodology

BehavioralFinanceRecognitionInvestorsAreInherentlyImperfect

Behavioralfinanceseekstocombinebehavioralandcognitivepsychologicaltheorywhichrecognizespeopleareimperfectwithconventionaleconomicsandfinancethatassumespeoplearerationalbeings.

Itsobjective:toprovideexplanationsforwhypeoplerepeatedlymakeirrationalfinancialdecisionsininvesting,spending,savingandborrowingmoneyleadingtoaninherent“InvestmentPerformanceGap”.

YourInvestingBrainTheDriversofImperfectDecision-Making

95%NaturalDNABehavior(Level1–Nature,

Instinctive,Automatic,Hard-wired)

5%LearnedBehavior(Level2–Nurture,Conscious

thinkingbasedonexperiences,

education,values)

CognitiveBiases(DrivenharderbyEmotions)

Emotions(Fear,Anxiety,

Greed,Excitement)

ImperfectDecision-Making

FinancialDNA® =FinancialPersonalityMulti-DimensionalBehavioralDiscovery

AdvisorClientCommunication

Goals&SpendingPatterns

FinancialPersonality

RiskProfile&BehavioralBiases

A Quicker and More Reliable Method to Predict How You Will React to Life, Business and Market Events

FDNA– 46Questions(10to12Mins)

EveryPersonhasaUniqueMixofImperfectionWhatisYourUniqueMindsetinMakingDecisions?

AggressiveGreedyTrades

IndependentMind

Follows OthersFailstoAnalyze

Sporadic

ParalysisbyanalysisMisses

opportunities

SellswinnersearlyHoldswinnerstoo

longDoesnotsell

losers

Opportunist/Excitement/Anger

Cautious/Fearful/Anxiety

FeelingsResults

QualityLifeBehavioralAttitudesforPurposeBasedPlanning

FinancialPlanningInsightsKeyBehaviorstoNavigateinthePlanningProcess

HighScores=70%andoverMediumScores=31%to69%LowScores=30%andunder

RiskBehavior

SpendingBehavior

Goal-SettingBehavior

Client’sNaturalBehaviorPortfolioRiskGroupBasedonRiskPropensityandRiskTolerance

YourAssessmentoftheClient’sCurrent PortfolioRiskProfileGroup

YourAssessmentoftheClient’sPortfolioRiskNeedGrouptoAchieveGoals

YourAssessmentoftheClient’sPortfolioRiskGroupbasedonCurrentFinancialRiskCapacity

FinancialDNANaturalBehaviorPortfolioRiskGroup(basedonRiskPropensityandTolerance)

FinancialDNA LearnedBehaviorPortfolioRiskGroup (FromFinancialPersonalityDiscoveryorAdvisor’sAssessmentoftheclient)

OverallSelectedPortfolioRiskProfileGroup(SelectedbyAdvisorand Clientbasedondiscussionoftheaggregateofallscores)

BuildingtheFinancialPlanandIPSAligningtheRiskProfiletoGoals,Capacity,andFinancialDNA

GoalsBasedBehavioralPortfolioDesignAStrategicApproachBasedonNeedsandWants

• 3PortfolioBucketswith$$$basedongoals(needsandwants),financialabilityandRiskProfile

• DifferentPortfolioRiskProfileGroupingforeachBucket

1.StrategyAllocation

• AssetAllocationdeterminedforeachPortfolioBucket

• PassivevsActiveInvestingStylevariesforeachBucketdependingonPortfolioRiskGroupingandCapacity

2.AssetAllocation

Goals-BasedBehavioralPortfolioDesignStrategyAllocation

3PortfolioBucketsA“MentalAccounting”Approach

OperatingPortfolio(“Preservation”)

Preserveprincipal,generateincomeandminimizevolatility.Amount:Min6to12monthscashfordailyactivities(shorttermneedsandwants),upto3

to5yearscashforRetiredPerson.

(RiskPortfolioGrouping1)

CapitalAppreciation(“Accumulation”)

Managevolatilitybutfocusonappreciationtogeneratefuturepurchasingpowerforbuildingretirementcapital(longterm

needs).Amount:5to10yearhorizon.(RiskPortfolioGrouping2to7)

StrategicPortfolio(“Speculative”)

Designedtomeetspecialobjectives,generatehighreturnsorcashflowandarelessliquid.Amount:Long-termhorizonandcanbelostwithoutretirementdamage(longtermwants).

(RiskPortfolioGrouping5to7).

Subjecttolevelofcapitalandinvestmentexperience,education

InvestorsLosingPerformanceAlphaTopSellingShortcomingstoManage

4.RegretAversion–Notaddingtowinnerswhentheytake-off

3.DispositionEffect–Holdinglosersfortoolong

2.RiskAversion–Sellingyoungwinners

tooearly 1.LossAversion(EndowmentEffect)–Holdingwinnerstoolong

UnderPerformance

Remember:Wealthcreationcomesfromsellingwell

SpecificMeasurementofEachBehavioral BiasInsightsforBehaviorally ManagingClientDecisions

PassivevsActiveInvestingOptimalApproachforAchievingGoals?

83%ofActivelyManagedFundsUnderPerform

1. Giventheaveragemarketperformanceis11.1%peryearovera10+yearperiod,clientsaremorelikelytoachievetheirgoalswithapassiveinvestingstrategy

2. Activeinvestinginherentlycarriesmoremarket,taxandemotionalrisk.

Optional:QualityLifeDiscoveryAnnuallyForPurposeBasedPlanningandAnnualGoalReview

QualityLifePerformancewithQualityLifeDiscoveryforSettingGoalsbasedonIdentifyingtheClientsCurrentStrengthand

StrugglesAreasforLivingaQualityLife– 80rating

Itemsacross8areastaking20to30minutes

Optional:QualityLifePlanningProcessForClientsinTransition

QualityLifePlanningProcess withLifePurpose

Discoverybasedonintegratingaperson’s

Talents,Passions,UniqueGift,Vision,Missionand

Values- ratingItemsacross6areastaking20to30

minutes

MyQualityLifeNeedsandWantsReview:Self-RatingNeedsandWants

Theprocesshelpstheparticipantidentifywhichoftheirneedsandwantsaremostimportant

CaseStudy1– FoodFranchiseEntrepreneurFocuson%Returnsand$$Wealth

Strength – VisionaryandgoaldrivenChallenge – DoesnotlistenPerformanceRisk– OverextendsBehavioralFinance– ConsolidatedviewofportfolioCommunication – ProvideoptionsonrecommendationsPortfolio - 80%Equities/20%Bonds(Alternativescanbe15%)InvestingStyle =65%Passive/35%Active

Group1 Group2 Group3 Group4 Group5 Group6 Group7

Pop.%in thiscategory

<2% 2-18% 19-30% 31-69% 70-81% 82-98% >98%

PortfolioStructure

CapitalProtection

Ultra-Conservative

Conservative Balanced Accumulation Growth Aggressive

NaturalRiskPropensity andRiskTolerance

Strength– PeopleconnectorChallenge - BecomesemotionalPerformanceRisk- SabotagesselfBehavioralFinance– HerdfollowerCommunication – SaywhoisinvolvedPortfolio - 50%Equities/50%Bonds(Alternatives0%)InvestingStyle =100%Passive

CaseStudy2– OutgoingDinnerPartyInvestorFocusonImageandToys

CaseStudy3– SuccessfulSoftwareBizFounderFocusonFamilySecurityandLifestyle

Strength – MaintainsstabilityChallenge - ProcrastinatesPerformanceRisk– NeedsguaranteesBehavioralFinance– LossaversionCommunication – Expressfeelings/emotionsPortfolio - 40%Equities/60%Bonds(Alternatives0%)InvestingStyle =100%Passive

BehaviorScrewstheNumbersKeyPointsforYourClientstoRemember

1. Everyone’sbrainunconsciouslyinterpretsandperceivesdatathatisparticulartothem.

2. Mostpeoplerecalltheirrecentexperiencesandrespondemotionally.Generally,theywillwantmoresafety.

3. Highspendingwillgetinthewayofachievingyourgoalsandwillrequiremoreportfoliorisk.

4. 95%ofdecision-makingisautomaticallybasedoninstincts.Checkyourselfbeforeyouwreckyourselfusingfinancialpersonalitydiscovery.

5. Identifywhichmotivationsandintuitionsconsistentlypushyoutosuccessandcomfortastheyaretobefollowed.Theonesthatleadtolossesarebehavioralandtheyneedtobemanaged.

FormoreinformationaboutFinancialDNA

Contact:DNABehaviorInternational5901-APeachtreeDunwoodyRdSuite375Atlanta,GA30328(770)274-0311ext703leon.morales@dnabehavior.com

www.dnabehavior.comwww.financialdna.com

FollowusonLinkedIn:FinancialPersonalityInsightsand/orFinancialDNAonTwitter

BehaviorallySMARTFinancialPlanningcanbefoundonAmazon

QuestionsandContactUsInformation

fdna behaviorally smart goals based planning · 2017-09-16 · centered business which is ......

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