The document discusses challenges advisors face in proving they are acting as fiduciaries, keeping clients engaged, and managing emotions. It proposes using behavioral finance insights to better understand clients and align solutions to their unique financial personalities. A system called Financial DNA uses a 46 question assessment to predict client reactions and help advisors customize communications, portfolio construction, and ongoing coaching to strengthen compliance and boost engagement.

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Advisors as Fiduciaries
Client-Centered Solutions
July 2016

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DNA Behavior Behavioral Finance Leader
Leon Morales
– Chief Relationship Officer
– Builder of successful people driven
organizations. A deep conviction in
organizational success; Cyclist & Runner
LinkedIn http://ow.ly/JrHDB
Leon Morales

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1. How to Prove Acting as a Fiduciary
2. Investment Management Becoming Commodity
3. How to Differentiate Themselves and Show Value
4. Difficulty in Keeping Clients Truly Engaged
5. Managing their Own and Client Emotions
6. Tied to Old Ways and Habits of Operating
Challenges for Advisors
Changing Industry Landscape

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FINRA Rules
2090 + 2111
“Know Your
Customer” and
“Suitability”
DOL Fiduciary
Rule
“Your Clients
Interests First”
Technical
Regulatory
Compliance
Current US Regulatory Environment Strengthening
DOL Fiduciary Regulations
Know and Retain, Essential Facts…Reasonable Basis…Reasonable
Diligence…Analyze Customer Specific Factors… Overall Quantitative
Suitability

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“The New World” for Your Advisors as a Fiduciary
How They Will Put Clients at the Center of the Plan
Products
Offerings Based
on Persona Model
Assumptions
Tailored Goals-
Based Planning
Using Financial
Personality
Insights
Customized
Behavioral
Coaching
Powered by a
FinTech Platform

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What Advisors and
Clients Do Based on
Instinctive Behavior
What Advisors and
Clients Should Do
Based on Rationality
Client-Centered
Communication
& Solutions
Behavioral
Biases &
Emotions
Managed
Behavioral Management Puts Clients Interests First
Aligning Advisor Approach to Client Style

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Value Proposition
Tangible Benefits of Behavioral Management

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What Happens When
Money Negatively Triggers Emotions?
Litigation
Risk
Client Retention

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Helping Clients Accomplish Goals
Navigating Behavioral Finance Biases and Emotions
Know
• Who is the client?
• Up-front discover the client’s natural communication
style, decision-making biases, risk, and goals
Engage
• How do you relationship manage the client?
• Communicate on the client’s terms to increase
emotional connection
Grow
• What solutions do you offer the client, and How?
• Behavioral management by re-framing information,
navigating decision biases and natural risk tolerance

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Active Client
Participation
to Boost
Engagement
Active
Behavioral
Management
by Advisor
Customized
Client First
Service
Experience
The Next Gen Business Model Based on
Direct Client Participation in Behavioral Discovery

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Financial DNA® = Financial Personality
Advisor Client
Communication
Behavioral
Biases
Financial
Personality
Risk Profile

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Quicker and 91% More Reliable Method to
Predict Reactions to Market / Life Events
Financial DNA – 46 Questions
(15 to 20 Mins)

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DNA Behavioral Management Guide Report
Helps Advisors Guide Clients to the Right Solutions
Report provides:
1. Behavioral differences between client and advisor
2. Guidance for the advisor to adapt their style to the client
3. Financial behavior biases and risk reporting
4. Client engagement meeting process and questions – relationship, financial
and investment behaviors
5. Behavioral IPS – aligning goals, financial capacity and risk-taking behaviors

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Your Assessment of the Client’s Current Portfolio Risk Group
Your Assessment of the Client’s Portfolio Risk Group Needed
to Achieve Goals
Your Assessment of the Client’s Portfolio Risk Group based on
Current Financial Capacity
Financial DNA Natural Behavior Portfolio Risk Group (From
Financial DNA Discovery Process)
Your Assessment of the Client’s Portfolio Group based on
Learned Risk Behavior Motivations
Overall Selected Portfolio Risk Group (Selected by You)
Building the Plan and IPS – Summary of Clients
Selected Portfolio Risk Aligned to Goals, Capacity

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Re-Framing Information
Minimize Risk of Miscommunication
Copyright © 2001 Universal Press Syndicate

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Team With
Lack of
Behavioral
Insight
?
? ?
?
Default Styles
=1 in 4
Engagement and
High Compliance
Risk
Matching
Employees and
Clients for 4 in 4
Engagement and
Compliance
23% Revenue
Uplift and Brand
Protection
Ensure Your Message is Heard and Understood
Client-Centered Business with Behavioral Matching
Behavioral Discovery
to Know, Engage and Grow
Employees and Clients
Life Style: Provide Fun,
Openness and Graphics
Stability: Provide Security,
Feelings and Instructions
Information: Provide Analysis,
Research and Details
Goal Setting: Provide
Discussion and Opportunities
Source: Gallup Organization 2009 and DNA Behavior Research 2001-2014

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Advisor / Client Behavioral Compatibility
Ensure Advisor Knows How to Adapt as Fiduciary

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Disposition Effect
Mental Accounting
Loss Aversion
Pattern Bias
Fear of Regret
Status Quo Basis
Risk Aversion
Benchmark Focus
Consolidated View
Herd Follower
Over Trading
Instinctive
Controlling
Optimism Bias
Over Confidence
Newness Bias
Financial
Personality Risk Can Increase Risk
- Taking
Need to Manage
Expectations
Down
Can Over-Influence
Caution
Need to Increase
Decision-Making
Confidence
Influence Decision-Making
Proactive Behavioral Bias Management

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Relationship
Orientated
Results
Orientated
Fast Paced
Moves Carefully
• Consolidated View
• Over Trading
• Optimism Bias
• Risk Taker
• Spender
• Herd Follower
• Instinctive
• Status Quo
• Risk Aversion
• Loss Aversion
• Fear of Regret
• Disposition Effect
• Saver
• Mental Accounting
• Pattern Bias
• Benchmark Focus
Financial DNA Natural Behavior Unique Style Matrix
Including Behavioral Biases and Re-Framing Communications

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Client’s Natural Behavior Risk Level
Portfolio Risk Grouping

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Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 7
Pop. % in this
category
<2% 2-18% 19-30% 31-69% 70-81% 82-98% >98%
Portfolio
Structure
Capital
Protection
Ultra-
Conservative
Conservative Balanced Accumulation Growth Aggressive
Acceptable
Conservative
Portfolio
Acceptable
Aggressive
Portfolio
One Portfolio Risk Grouping
Approach: Build the portfolio within +/- 1 Grouping of the Natural Behavior Portfolio
Risk Group as it reflects the long term “go to” default behavior. Subject to:
1. Review of the Investment Portfolio Risk Reward Analysis in the context of the
client’s goals and financial capacity
2. The client’s Potential Learned Risk Behavior Motivations.
Building a Behavior-Centered Portfolio with the Client
Include the Client in the Decision-Making Process

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Navigating Couple Differences
Frank and Mary Butler

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Recap: Process for Fiduciary Advisors Using Financial DNA Insights
Impacting Every Phase of the Financial Planning Process
Financial DNA
Discovery Process
Advisor EQ and
Team
Development
Advisor-Client
Matching
Customized
Communication
Tailored
Portfolio
Construction
Deeper and
More
Consistent
Client Inquiry
Process
Greater
Disclosure of
Client:
Goals
Interests
Priorities
Offering Client
Centered
Solutions
Tailored to Style
Ongoing
Behavioral
Coaching
Compliance
Monitoring
23% Revenue
Uplift from
Client
Engagement
1.5% on
Portfolio AUM
Value

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Wealth Mentoring
Moving from Advisor to Wealth Mentor
Traditional Advisory Approach:
• Financial Planning Technician
• Investment Manager
• Financial Education
Wealth Mentoring Role:
• Behavioral Guide
• Quality Life Guide
• Wisdom Transferor
• Collaborator
• Sounding Board
Wealth Mentor
24

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The Science
Behind the Financial DNA Systems
Powerful and
Unique Client
Centered
Behavioral
Solutions Delivered
in 123+ Countries
and 11 Languages
Forced Choice
Assessment
Measuring 64
Behavioral Traits
60+ Man Years of
Development
Invested Since
2001
Independent
Validation by
Team with 100+
Years of
Experience

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Behavioral Finance Resources - Tour
http://financialdna.com/behavioral-finance-resources/
Our focus here at DNA Behavior in the USA and Canada in 2016 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.

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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
www.dnabehavior.com
www.financialdna.com
Follow us on LinkedIn: Financial Personality Insights
and/or Financial DNA on Twitter
Questions and Contact Us Information