Financial DNA - Discovering Your Unique Financial Personality for a Quality Life!

Last week I was working with one of our Certified Wealth Mentors with my role to offer some behavioral insights on some difficult client cases. The cases were difficult because of the clients’ attitudes not only to financial decision-making but also to life. These cases reaffirmed to me how much trust is core to all dimensions of every client situation. This is why when we redeveloped our DNA personality system in the past year we made trust a new stand-alone personality factor. Often when we talk about trust it is in the context of our role as trusted advisor and building open relationships with clients. Certainly, this is an important dimension. Talking about trust in this way is fine. However, the heart of truly understanding trust and to knowing our clients is to know where trust comes from. There are a number of very important dimensions to trust that we all need to know. Let me ask you the question: How much do you trust yourself? Trusting yourself is the starting point of building sound relationships and also making sound decisions. Your own level of personal trust will determine whether you will trust others and then whether others will trust you. So, if you want to know whether your clients will trust you, reflect on your own level of self trust and then learn about their self trust.

No matter the industry, providers of products and services are always saying something to the effect of: "You are blind as to who is going to walk in the front door for their first meeting with you. As you work with the client a bit you have a greater collection of knowledge but still not the whole picture. It can still take 10 years or more to really know who you are dealing with". Do you truly know the life and financial motivations of your clients? Their deepest desires? Do you know their risk tolerance? Do you know what types of products and services they want?

In recent weeks we have strongly focused our messaging around "business transformation". In particular, the need to address the client experience that is being provided in order to transform. So often, leaders regularly talk about getting the right people on board, developing the team and the leadership, having the right product, focusing the business plan, improving execution etc. These are all important dimensions; however, they are not all of it.

For advisors, growing your financial planning business is about getting more of the right clients who you can profitably serve on a sustained basis. This means you must have financial planning clients who will pay for the value you provide and will allow you to do so efficiently and with minimum wasted energy. I am sure this sounds logical and for many financial advisors this will sound obvious. The question is: are you acquiring clients and managing relationships as well as you can?

Have you considered what is going to propel growth in your business in the coming months and years? Schwab conducted a research study in March 2009 which shows the greatest 3 enablers of growth are: 1. Closing the deal with prospects - 75% 2. Maintaining quality service - 73% 3. Adding new technology for scalability - 67% So what is your strategy for closing more prospects more quickly and improving client service?

The theme at this week's FPA Conference in Annaheim centered on trust. Becoming the trusted advisor is not a new idea however, it is increasingly talked about. The question is how do you become the trusted advisor? How do you accelerate trust in your advisory relationships, and for that matter in any relationship? Building trust is directly related to how you behave in relation to others. What many do not know is that the starting point for trust starts with your behavior. If you do not trust yourself, then you will not trust others and others will not trust you. What we have learned from research is that some people are not naturally wired not to trust and hence will always have more inherent difficulty in building trusted relationships. So, these skeptical people have to be more conscious in developing trust with clients (and their team).

In my work with entrepreneurs and family business owners there are quite divergent views about whether to bring children into the family business when they are young adults, or even at any stage. Some say never and others have a desire to perpetuate the family association with the business. There are cases for both. Of course, rationality plays into it and the family legacy. In my own case, I had to work through many of the issues because our family had a pastoral (cattle ranching) business which I eventually managed for a number of years. I enjoyed it from a business perspective but ultimately did not have the passion to make it a life long endeavor. My brother was not interested at all. The big issue is, do the children want to be involved in the business? Then importantly, what is their passion for the business?

Risk tolerance is a much talked about area in financial planning and it is one core component of an investor's unique financial behavior - what we call their Financial DNA. It is so fundamental that we are always talking about it and making decisions with reference to it. A huge difficulty has been reliably measuring an investor's risk tolerance. One of the problems is that an investor's risk tolerance is assessed today but then a portfolio is developed for the long term which has to cope with fluctuating markets. Do you truly know what your client's risk tolerance for the long term is? How much of your assessment of the client's risk tolerance is based on current situational factors and their emotional impulses today about the market? Then add in the fact that a person's risk tolerance may differ across different asset classes. Of course, an advisor's own risk tolerance can color the situation resulting in the client "eating" the behavior of the advisor. There have been lots of examples where a group of advisors addressing the same case facts at the same time will come up with different risk tolerance assessments for the client. After more than 10 years of studying financial behaviors, including risk, and performing research based on our online profiles Financial DNA Resources has now launched our "Behavioral Portfolio Report". You can download a copy of it here: http://financialdnaresources.com/FinancialDirections.

In recent times I have done a lot of talking about your "success impediments". What is getting in your way to success? A lot of the time it is our own mind. We allow negative thinking to get in the way. This will be true at any time particularly when times are tough and we are fearful. Or it will happen because we have limited experience or a lack of confidence. However, we should never let the big thoughts go away.

Last week I participated in a learning program for fast growth businesses conducted by Verne Harnish (founder of Gazelles, Inc) who is world renowned as "The Growth Guy". Verne has run training workshops for and coached many great entrepreneurs all over the world. He has a very straightforward approach to helping an entrepreneur stay focused.

When one looks at business, it is easy to miss or not appreciate the importance of private businesses and entrepreneurship. How often do you look to the larger public companies for opportunities, marketing and jobs? Probably a lot. This is what many first think of doing.

I have just read KPMG's Swiss Financial Services Newsletter for August 2008. The newsletter provides very sharp insights into the increasingly complex international needs of high net worth individuals. The outcome is that the consulting team will need to have a greater global outlook and more sophisticated approach to the technical and human issues impacting the HNWI client.

In recent months I have written a few blogs about corporate governance and business risk management. I have expressed the view that many of the corporate problems we have today are related to ineffective board governance. It has been interesting being in Europe for the past 2 weeks where this subject has come up in many discussions with business leaders and in the press. Clearly, the topic of corporate governance is high on the agenda. It needs to be because this is the source of so much corporate damage.

Back in March of this year, I wrote a blog about managing the human risks in your business. This issue has not gone off the radar screen. Identifying the human behavior risks in your business is critical to success. Every person has natural "blind-spots" which, if they go unchecked, can lead to individual performance failures, team failures, leadership failures and ultimately significant business problems. Regardless of the size of your business, the behavior of your people will influence the result. The influence will be higher the more senior the person is in the business. Look at why some major companies have failed in recent years - it is not the poor economy or financial markets, rather they have exposed the fundamental issues, particularly the behavior of leaders.

At the moment, more than ever, the whole notion of trust in every aspect of our lives is important. For many, trust is very low, if not shattered, with our leaders, advisors, partners and family members. Furthermore, trust in ourselves is low, which is the core of the issue. If your business and personal relationships are not working as well as you would like, or your performance could improve, see whether it is because your trust is low. “Relationships of trust depend on our willingness to look not only to our own interests but also to the interests of others.” – Peter Farquharson My starting point with trust is always to ask 3 questions: How much do you trust others? Do you feel others trust you? Importantly, do you trust yourself?

In the past few weeks we have had a number of people contact us who are starting some form of business partnership together. Most of the time their request has been to find out more about their differences. Some of the typical issues they are seeking to understand are: 1. What are our different talents? 2. What should our role in the business be? 3. What areas do we have to watch out for? 4. Do we have shared values and purpose?

In recent years there has been a lot written about how wealth created by the first generation (the entrepreneur) is lost by the third generation. Often the second generation has also added to the wealth. Then the third generation has lost it through being irresponsible, idle or simply making poor decisions. Research from a range of sources is consistently showing that this is happening in over 70% of family wealth transfers. A significant aspect of intergenerational wealth loss is related to the fact that the financial and estate plans do not adequately take into account the human issues involved.

Today, I listened to a great presentation by Tal Ben-Shahar who teaches positive psychology at Harvard University. Interestingly, his 2 courses have been rated the most popular in the university. No wonder, he is so motivating.

The primary foundations of Financial DNA are "Know Thyself" and Know Thy Client". However, what I have not spoken up much before about is "Know Thy Investments". For both the advisor and the client this is absolutely critical to successful investing. Who at some point has been caught in an investment they did not fully understand and lost money?

The current financial crisis is bringing to light a huge workplace shift. For many baby boomers, they only had one career or expected to have one career. The thinking of this generation was that upon getting your qualifications you had one career - working up the ranks often in the same company. Today, it is expected that the Gen Y's will have 10 or more careers. They will job hop. Although, this may be more difficult to do in the current circumstances.

When I was a financial planner and even before that a CPA, I had regularly observed that people's behavior and decision-making patterns changed when they were under pressure; the pressure often being caused by money and relationships. This observation was fundamental to my thinking when I was building the Financial DNA Discovery Process with my team. We wanted to know what a person's natural instinctive behaviors are as this would be key to predicting how they would really behave when there were difficult times and/or difficult decisions had to be made. This plays into the research we recently did of 100 advisors with AUM over $50million. 70% of them said that they were surprised by their clients’ reactions. Why?

I have had some interesting discussions in the past week with financial advisors and managers of advisors. With the financial downturn everyone is evaluating where they are at. The big question being asked is: "Should you be in the business?" My feeling is that over the next 1 to 3 years many current advisors will give up or be forced out. When you think there is research showing that 89% of clients are considering switching advisors there is much to think about. The financial services landscape is going to change dramatically.

I have had some interesting discussions in the past few weeks with business leaders from many different industries and backgrounds in the United States. One of the areas that consistently comes up is poor corporate governance. As mentioned in my last blog most of the economic problems we have right now are due to the behavior of our leaders. Being direct, alot of leadership behavior is not properly monitored. So, a key step towards fixing the problems we have today would be to change the corporate governance structures in publicly traded companies.

At the moment there is alot of talk about the collapsing business and financial environment. For everyone it is having an impact in all sorts of ways. Of course, we all look at the numbers side of the equation; but what about the people side? What are the human risks in your business? How are your people behaving in these times? Then, also, how do you want them to behave to handle the crisis and then build your business going forward? We have been working with many companies all over the globe on managing and developing their human capital. In this regard, we have been using our Business DNA Business Risks Matrix. Review a summary here: http://www.financialdnaresources.com/images/BusinessRisks.jpg

In the financial services industry there are a lot of supporters for the use of behavioral profiles as part of the client discovery process and there are some detractors from using them. Like in any situation where there are detractors most have not yet had a positive experience or seen the full benefits or simply have been listening to the wrong information. This is human nature. Overall, I do believe that you can never have enough information about yourself, your clients and also your team. As Benjamin Disraeli said: "The most successful people are those who have the most information". Of course you also need to have the best and most accurate information.

A statement I have been making to many people for the last 10 years is: "Investment markets cannot be controlled, but how you manage your reaction to them can be". Generally, for most investors the reason that they obtain returns which are on average 6% lower than market returns is because of their behavior. Investors generally make poor investment decisions because of their reactions to events and also to their own life circumstances. This can be because they do not know who they are or how to manage their emotional impulses which are driven from how they are wired to behave. I really want to emphasize that successful investing is about managing your behavior.

Hang on. Where is the market going to? Will the Dow be 5000 in the next few months by June 2009 or 22000 in 6 years? Who knows. They are interesting questions. I have placed my own personal wager on the markets reaching these levels in those time frames with some friends. I have often talked about this with friends and clients since 1999. Japan could still get messy for the world yet as it has many unresolved issues. These problems coming down the pipeline have been a big part of my move into the human behavior business. However, this whole discussion does call into question what is our role in advising clients? Is our role to help them manage their behavior or to get the highest maximum performance?

Well the stock market has gone to 10 year lows. Has it hit the bottom? That is not necessarily the crucial issue although this downward spiral will be raising more fears. What is crucial is how you handle this situation in terms of your own behavior and managing that of your clients. If you read my last blog you will see research is showing that advisors are on the whole not going far enough in client discovery and in particular understanding behavior. Here are some tips for managing your clients which are all based on having greater behavioral understanding...

With turbulent financial markets it is far more likely that your true financial behavior will emerge and strongly influence your financial decisions. The degree to which this true financial behavior emerges and your ability to effectively manage it will to a large degree depend on how much pressure you come under because of financial concerns and difficulties. How are you going to navigate these difficult times? To what extent will your emotions drive decisions?

For a few years now there has been an increasing trend toward people taking steps to find greater meaning in their life. Gradually, more and more people are having the courage to do it and not just talk about it. This may involve turning their back on what is a well paid job and years of study and even moving from where they live. I even believe that this desire to find meaning will increase with turbulent financial times which could be quite dislocating for some. To survive emotionally and financially people will have to change their perspective on life and their relationship to money so that their meaning is not as much defined by how much they have.

Generally in business, and particularly in financial services, people associate risk with the markets or economy. What we fail to drill down into are the risks caused by human behavior. Another way of looking at this is to consider how people handle the market risks. What decisions do they make? What solutions do they come up with? How do they manage their emotions? How do they communicate?

Would you prefer to be asked about your dreams or your goals? Last week in one of our Wealth Mentor Community Calls we discussed this very question. Prior to the meeting, I had the Wealth Mentor participants read a book called the Dream Manager by Matthew Kelly. This book really brings out the connective power of encouraging people to get in touch with their dreams. The point that emerged during the discussion was that most people would prefer to be asked about their dreams rather than goals.

On the weekend, I had the great fortune to listen to a very inspiring presentation by Dr. Ben Carson. Dr. Carson is a leading pediatric neurosurgeon at the John Hopkins Hospital. In his career he has been a pioneer in performing highly risky surgery on children. He has a great book: "Take the Risk - Learning to Identify, Choose and Live with Acceptable Risk". Dr. Carson explained how he has often been faced with addressing the viability of taking a major risk in his work. What is there to gain? Will it be worthwhile? What if I fail?

The stage is now set. The family have committed to a meeting. Further, the initial homework has been done with everyone completing their Financial DNA® Profiles, Family Quality Life Review and other pre-meeting exercises. Remember, there are a lot of settings for a family meeting. Further, there are a lot of times when key questions can be asked. Questions can be asked during meetings with professional advisors, whilst on vacation, over dinner at the family home or in more formal settings such as during a family retreat. The issue is now what questions will be asked at the family meeting?

What has been the impact of money on your family? This is a big question and one often addressed in a family meeting. Also, it is often asked by your financial advisor in the financial planning discussion. In many ways these impacts will shape who the family is, determine the family relationships, define the family legacy and how the family is remembered by others. My Podcast Alley feed! {pca-c7785816d46106f2dad9db212636c9c3}

Recently, I have had a great experience in reading a book called “The Energy of Money” by Maria Nemeth. I would thoroughly recommend this book to any person who is interested in better understanding their relationship to money. After all, this is what I have been advocating very strongly in my past few blogs. To become financially educated and realize your potential, you need to understand who you are and why you make the life and financial decisions that you do.

My last couple of podcasts have really hit on the issue of financial education to develop greater financial capability for the consumer. The need is now "red hot" with the financial markets in turbulence and many people very concerned about how they will unwind. Are we at the lows yet? It would not seem likely. So, there is potential for a lot more concern and emotion yet.

Financial DNA was originally built based on our passion to see the consumer receive education to become more financially empowered and in our view this starts with greater self-understanding. Consumer financial education does not start with understanding the technical aspects of alpha and beta and what a stock or bond is, or hedge funds. So, we believe that financial advisors must play a greater role in consumer financial education starting with client behavior.

Core to my passion is seeing people take more personal responsibility for their financial decisions. In the end this is actually key to your financial success, and overall quality life. To take more personal responsibility means increasing your financial capability. I believe there is an obligation on yourself to get the right financial education and also on your financial advisors to help you by providing it and guiding you. In the end, you need to be able to make more informed choices about the products and solutions you are buying, and not just rely on others to decide for you.

A common derailer that I have seen in many families is a lack of transparency. There is key information which is not being disclosed to other family members and, in some cases, to key people in a family business. Usually, this is caused by the holder of the information not trusting the other family members in some way.

Do you want greater family unity, and hence greater family harmony, wealth and ultimately a quality life? If yes, the key then is to start planning a family meeting and hopefully make it an annual event. Remember, every family has some level of dysfunction so you need to realize that but not let it deter you from having a meeting.

One of the questions I am often asked is does birth order influence your behavioral style? Well, based on the research we have performed, birth order does not influence your natural behavior.

Recent research into the human mind has found that the secret to success in any long-term endeavor, whether it be in business, relationships or investing, is an attribute called ‘Emotional Intelligence’ (otherwise known as ‘EQ’). EQ is a type of intelligence that’s significantly different to the standard IQ-based definition of ‘smart’ we’re all used to. The topic of ‘EQ’ has received significant coverage in the business world in the last few years, fueled in particular by Daniel Goleman’s books which are aimed at helping business people use the skill to further their careers and effectiveness.

Life purpose discovery is difficult and in many ways a journey in its own right. However, the process of discovery does become easier if a process is followed and you have a way of thinking about it. I recently read a great book on life purpose, and by chance today found out that Oprah is currently doing a series on it. The book is "A New Earth - Awakening to Your Life's Purpose" by Eckhart Tolle.

The topic of money is missing from the coaching agenda full-stop. Why? Talking about money can be a very emotionally charged issue for both the leader and the consultant/coach. Many people are, when it gets down to it, mystified by money and the power of its impact.

Last night I was called by a family friend (for the sake of the innocent Amy) who was being pushed by an advisor to make a major decision in regard to transferring her retirement savings account. Why was Amy asking me the question...?

Many financial decisions are a reflection of your life and behavior. Key to finding balance is helping the client objectively understand their inherent strengths and struggles based on who they uniquely are, and then their preferences. So, the balance will be different depending on our different behavioral styles.

My approach in working with client's has been to fairly early on in the conversation ask them: What are you passionate about? I have found this to be a very powerful question in finding out where their life is at and where they want to go. This is so important if you are helping someone set their goals and direction. I do not really believe you can do financial planning for a person without knowing their passion because it is so fundamental to their life. Having clarity of your passions regardless of what they are means you can make decisions with confidence and commitment.

What sets a truly great individual apart from others is often found in their ongoing commitment to growth and personal development. An important step for business leaders, financial advisors or any person seeking to get to the next level in their life and career is being prepared to be coached or mentored. By experiencing coaching or mentoring you will also become better equipped to guide others to success and building a quality life.

During a recent Wealth Mentor Training with a group of financial advisors we were discussing our definitions of a “Quality Life”. A number of advisors made a very key observation: Is there such a concept as a balanced life? Can a person really have balance? This discussion really hit a chord with me as this point really gets to the core of what the Financial DNA program is all about.

Recently I asked the following question to a group of entrepreneurial businessmen that I was facilitating: “Who is in the way of your success?” I was amazed to hear the answer: “ME”. Yes, that is correct. All of them acknowledged that they are the person in the way of their own success. This was equally true in running their business or their own life and relationships. I was very happy to hear this answer because it is the truth. So often we have trouble seeing through our own ego and blind spots to acknowledge that it is us who is in the way. There are other factors too of secondary importance such as lack of capital, finding the right people, market forces etc