www.financialdna.com
FinancialDNA®BehaviorallySMART™ Goals-BasedPlanning
www.financialdna.com
HughMassieCEOandFounderofDNABehaviorInternational
BehavioralFinanceStrategistPioneerofFinancialPersonalityDiscoveryFundManagerWealthMentorBoardMemberAuthorofFinancialDNA®
Hughadvocatesfocusingonmanagingtheemotionalaspectsofdecision-makingtoimprovefinancialplanningperformance.
www.financialdna.com
FinancialDNA®DeliveringFinancialPersonalityInsights“Behavioralizing”FinancialPlanning
Matchadvisoryteams,clients,goalsandsolutions
Since2001,wehavebeenenhancingthecapabilityoffinancialservicesbusinessesworldwideto“know,engageandgrow”millionsofinvestorsbythedeliveryofuniqueFinancialDNAbehavioralfinanceinsightsdatausingourscalablebehavioralfintech platform.
Theprovenoutcomeisaclient-centeredbusinesswhichiscompliantandout-performs.
www.financialdna.com
“TheNewWorldCulture”forAdvisorsHowWillYouPutClientsattheCenterofthePlan
ProductsOfferingsBasedonPersonaModelAssumptions
TailoredGoals-BasedPlanningUsingFinancialPersonalityInsights
CustomizedBehavioralCoachingPoweredbyaFinTech Platform
www.financialdna.com
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
www.financialdna.com
DNABehavioralizes MoneyforAdvisorsandClientsPredictingPlanningRisksTriggeredbyBehavior
FinancialPersonality Money
Emotions
BehavioralResponsesDrivingDecision-Making
www.financialdna.com
Goals-BasedFinancialPlanning ObjectiveBehavioralManagementistheFoundation
1.Strategicallybuildagoals-basedplanreflectingtheclient’s:(i)Purpose-basedgoals,and(ii)Investmentriskprofilebasedontheir(a)financialabilitytotakerisk(capacity)and(b)willingnesstotakerisk(riskpropensity,toleranceandlossaversion).2.Then,behaviorallyguidingtheclientonthejourneytoachievingtheirgoalsbyhelpingthemmakesounddecisionsduringtheupsanddownsoflifeandmarketevents.
www.financialdna.com
TheFinancialPlanningRiskforClientsAchievingGoalsorDesiredAfter-TaxReturns?
1. Thebiggestfinancialplanningriskisclientsnotachievingtheirgoalsinthedesiredtimehorizon;notmarketvolatility.
2. Thekeyisforclientstoalwaysbeemotionally-calmwhenmakingkeydecisions;“checkyouremotionsbeforeyouwreckyourself”.
3. Definepurpose-basedgoalsbasedonneedsandwantsfortheshort,mediumandlongtermtohavegreateremotionalcommitment.
NaturalBehaviorAwareness:• Left-braininvestorswillbemorereturndriven• Rightbraininvestorsaredrivenbylifestability
www.financialdna.com
Suitablewealthcreationstrategiesbasedonpurpose-basedgoalsalignedtowhotheclientis
CommunicationStyle+FinancialPersonality
QualityLifeGoals
FinancialPlan
DiscoveryProcess
Managingexpectationsforcommittedlongtermdecisions
TheFinancialDNADiscoveryProcessHolisticClient-Centered Methodology
9
www.financialdna.com
BehavioralFinanceRecognitionInvestorsAreInherentlyImperfect
Behavioralfinanceseekstocombinebehavioralandcognitivepsychologicaltheorywhichrecognizespeopleareimperfectwithconventionaleconomicsandfinancethatassumespeoplearerationalbeings.
Itsobjective:toprovideexplanationsforwhypeoplerepeatedlymakeirrationalfinancialdecisionsininvesting,spending,savingandborrowingmoneyleadingtoaninherent“InvestmentPerformanceGap”.
www.financialdna.com
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
www.financialdna.com
FinancialDNA® =FinancialPersonalityMulti-DimensionalBehavioralDiscovery
AdvisorClientCommunication
Goals&SpendingPatterns
FinancialPersonality
RiskProfile&BehavioralBiases
www.financialdna.com
A Quicker and More Reliable Method to Predict How You Will React to Life, Business and Market Events
FDNA– 46Questions(10to12Mins)
www.financialdna.com
EveryPersonhasaUniqueMixofImperfectionWhatisYourUniqueMindsetinMakingDecisions?
AggressiveGreedyTrades
IndependentMind
Follows OthersFailstoAnalyze
Sporadic
ParalysisbyanalysisMisses
opportunities
SellswinnersearlyHoldswinnerstoo
longDoesnotsell
losers
Opportunist/Excitement/Anger
Cautious/Fearful/Anxiety
FeelingsResults
www.financialdna.com
QualityLifeBehavioralAttitudesforPurposeBasedPlanning
www.financialdna.com
FinancialPlanningInsightsKeyBehaviorstoNavigateinthePlanningProcess
HighScores=70%andoverMediumScores=31%to69%LowScores=30%andunder
RiskBehavior
16
SpendingBehavior
Goal-SettingBehavior
www.financialdna.com
Client’sNaturalBehaviorPortfolioRiskGroupBasedonRiskPropensityandRiskTolerance
www.financialdna.com
YourAssessmentoftheClient’sCurrent PortfolioRiskProfileGroup
YourAssessmentoftheClient’sPortfolioRiskNeedGrouptoAchieveGoals
YourAssessmentoftheClient’sPortfolioRiskGroupbasedonCurrentFinancialRiskCapacity
FinancialDNANaturalBehaviorPortfolioRiskGroup(basedonRiskPropensityandTolerance)
FinancialDNA LearnedBehaviorPortfolioRiskGroup (FromFinancialPersonalityDiscoveryorAdvisor’sAssessmentoftheclient)
OverallSelectedPortfolioRiskProfileGroup(SelectedbyAdvisorand Clientbasedondiscussionoftheaggregateofallscores)
BuildingtheFinancialPlanandIPSAligningtheRiskProfiletoGoals,Capacity,andFinancialDNA
www.financialdna.com
GoalsBasedBehavioralPortfolioDesignAStrategicApproachBasedonNeedsandWants
• 3PortfolioBucketswith$$$basedongoals(needsandwants),financialabilityandRiskProfile
• DifferentPortfolioRiskProfileGroupingforeachBucket
1.StrategyAllocation
• AssetAllocationdeterminedforeachPortfolioBucket
• PassivevsActiveInvestingStylevariesforeachBucketdependingonPortfolioRiskGroupingandCapacity
2.AssetAllocation
www.financialdna.com
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
www.financialdna.com
InvestorsLosingPerformanceAlphaTopSellingShortcomingstoManage
4.RegretAversion–Notaddingtowinnerswhentheytake-off
3.DispositionEffect–Holdinglosersfortoolong
2.RiskAversion–Sellingyoungwinners
tooearly 1.LossAversion(EndowmentEffect)–Holdingwinnerstoolong
UnderPerformance
Remember:Wealthcreationcomesfromsellingwell
www.financialdna.com
SpecificMeasurementofEachBehavioral BiasInsightsforBehaviorally ManagingClientDecisions
22
www.financialdna.com
PassivevsActiveInvestingOptimalApproachforAchievingGoals?
83%ofActivelyManagedFundsUnderPerform
1. Giventheaveragemarketperformanceis11.1%peryearovera10+yearperiod,clientsaremorelikelytoachievetheirgoalswithapassiveinvestingstrategy
2. Activeinvestinginherentlycarriesmoremarket,taxandemotionalrisk.
www.financialdna.com
Optional:QualityLifeDiscoveryAnnuallyForPurposeBasedPlanningandAnnualGoalReview
QualityLifePerformancewithQualityLifeDiscoveryforSettingGoalsbasedonIdentifyingtheClientsCurrentStrengthand
StrugglesAreasforLivingaQualityLife– 80rating
Itemsacross8areastaking20to30minutes
www.financialdna.com
Optional:QualityLifePlanningProcessForClientsinTransition
QualityLifePlanningProcess withLifePurpose
Discoverybasedonintegratingaperson’s
Talents,Passions,UniqueGift,Vision,Missionand
Values- ratingItemsacross6areastaking20to30
minutes
www.financialdna.com
MyQualityLifeNeedsandWantsReview:Self-RatingNeedsandWants
Theprocesshelpstheparticipantidentifywhichoftheirneedsandwantsaremostimportant
26
www.financialdna.com
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
www.financialdna.com
Strength– PeopleconnectorChallenge - BecomesemotionalPerformanceRisk- SabotagesselfBehavioralFinance– HerdfollowerCommunication – SaywhoisinvolvedPortfolio - 50%Equities/50%Bonds(Alternatives0%)InvestingStyle =100%Passive
CaseStudy2– OutgoingDinnerPartyInvestorFocusonImageandToys
www.financialdna.com
CaseStudy3– SuccessfulSoftwareBizFounderFocusonFamilySecurityandLifestyle
Strength – MaintainsstabilityChallenge - ProcrastinatesPerformanceRisk– NeedsguaranteesBehavioralFinance– LossaversionCommunication – Expressfeelings/emotionsPortfolio - 40%Equities/60%Bonds(Alternatives0%)InvestingStyle =100%Passive
www.financialdna.com
BehaviorScrewstheNumbersKeyPointsforYourClientstoRemember
1. Everyone’sbrainunconsciouslyinterpretsandperceivesdatathatisparticulartothem.
2. Mostpeoplerecalltheirrecentexperiencesandrespondemotionally.Generally,theywillwantmoresafety.
3. Highspendingwillgetinthewayofachievingyourgoalsandwillrequiremoreportfoliorisk.
4. 95%ofdecision-makingisautomaticallybasedoninstincts.Checkyourselfbeforeyouwreckyourselfusingfinancialpersonalitydiscovery.
5. Identifywhichmotivationsandintuitionsconsistentlypushyoutosuccessandcomfortastheyaretobefollowed.Theonesthatleadtolossesarebehavioralandtheyneedtobemanaged.
www.financialdna.com
FormoreinformationaboutFinancialDNA
Contact:DNABehaviorInternational5901-APeachtreeDunwoodyRdSuite375Atlanta,GA30328(770)[email protected]
www.dnabehavior.comwww.financialdna.com
FollowusonLinkedIn:FinancialPersonalityInsightsand/orFinancialDNAonTwitter
BehaviorallySMARTFinancialPlanningcanbefoundonAmazon
QuestionsandContactUsInformation