The Institute for Innovation Development interview series invites innovation experts, innovative business leaders and emerging FinTech companies to talk to our readers about their latest innovation activities. The series seeks to learn from innovative business creators, uncover innovation best practices, and apply these insights into a financial services business model.
We recently sat down with Leon Morales, Chief Relationship Officer of DNA Behavior International, a robust technology platform designed for financial advisors which delivers practical and scalable behavioral intelligence solutions to “Know, Engage and Grow” their relationships with their clients and prospects.
Hortz: In today’s environment, advisors need to go much deeper in applying the “know your customer” rule and in client engagement. How does DNA Behavior help advisors do that?
Morales: Per our research, every person inherently has, what we call, a unique Financial DNA® code representing their financial personality. A person's natural born DNA behavioral style shapes their financial personality -- including risk taking - by their current environment, life experiences, values, and education. Their natural DNA Behavioral style remains stable over time and will drive how a person consistently responds to different events, thereby always influencing life and financial decision making. We have developed the tools necessary for advisors to help determine and manage their clients’ behavioral styles. It’s also important to point out that research shows that 93.6% of the financial planning process is the behavioral management of clients. [Research cited: Meir Statman, University of Santa Clara, California “The 93.6% Question of Financial Advisors,” Journal of Investing, Spring 2000].
Additionally, our compliance management program helps firms achieve a 99.75% level of suitability between the client’s goals, risk profile and the solutions offered. Currently, advisors are only 40% accurate in identifying their client’s risk profile. Our starting point is with a person’s natural instinctive behavior because that is where they are going to revert to when they are under pressure. Significantly, this approach reduces costly complaints placing advisors and firms in years of litigation.
Hortz: Does your FinTech platform help advisors address the DOL’s fiduciary ruling?
Morales: Yes. The DOL definition of a fiduciary demands that advisors act in the best interests of their clients, and to put their clients' interests above their own. The Financial DNA Discovery Process is the next generation of behavioral discovery capturing all dimensions of a client’s financial personality by utilizing the most academically sound psychometric systems. We strongly advocate this approach because it provides a more accurate measurement of who the client is and therefore the best starting point for any discussions about important life and financial decisions, and longer term education and development.
Further, the Financial DNA reporting system provides insights on how best to communicate, framing relevant information on the client's terms. These insights increase the client's chances of understanding the advice or recommendations and can reduce the impact of behavioral biases triggering irrational decision-making by both the client and the advisor.
Hortz: Talk about the power of questions! The 46 questions in your Financial DNA Natural Behavior questionnaire are fine-tuned enough to uncover such deep behavioral insights into your clients!? What have you determined as the accuracy of the tool?
Morales: The Financial DNA Discovery System was independently validated to have a 91% reliability rating by Professors of Industrial Psychology at GeorgiaTech University and among many independent psychometric and business consultants each with 10+ years of related business and financial services industry experience.