Can You Trust Your Bank to Recommend the Right Products?

Finding a Bank or Financial Planning Firm Who Actively Cares About Their Clients

A few weeks ago, Jack Sun who is a net worth investor, received an unsolicited email from Europa Transactions Bank in Chicago requesting he invest in a high-yield investment opportunity. Apparently, the offer was being extended to all of the prospects and clients in the bank’s database who had previously filled out any kind of inquiry form.

Jack felt quite queasy in his stomach at receiving an unsolicited offer like this from a bank with whom he had no personal relationship. He had received similar emails from other banks before and gradually built up a lot of negative resistance to such approaches.

He couldn’t understand how a bank can make this offer when they hardly know anything about him. Jack’s skeptical mind began to wonder whether some of the banks were trying to get an edge on the consumer using faulty diesel-powered systems. After all, in the modern day age of Big Data research it would be reasonable to expect that a bank would at minimum use statistics and some casually built online surveys to roughly paint a persona of the prospect or client.

Jack reflected that given the recent stock market turbulence and increasing complexity of investing, this might be the time to find the right financial planning relationship.

The Land Grab by Banks for Owning the Client-Centered Financial Planning Space

While I was hearing Jack’s story on the golf course, I felt motivated to tell him that there was a fresh approach to banking and financial planning coming. No longer would banks and financial planning firms be playing the guessing game of what is suitable to offer a client and how to engage them.

I told him of an emerging trend of established banks out there starting to make a grab for the space of being the leading client-centered brand that put the interests of their clients first. In fact, this is what the regulators globally are requiring and the Obama Administration is pushing with the Fiduciary Standard, although it has not been happily embraced by all, yet. For a few years now, some of the banks had been re-branding themselves as client-centered but had no high-quality scientific process which required active client participation to demonstrate it. Jack became intrigued and asked more about what to look for from a bank who would potentially meet his wealth management needs.

I explained to Jack that what he should look for was a bank who adopts the approach of “understanding people before numbers” by discovering who the client is first and then collaboratively building a financial plan and investment policy statement which recognizes his complete financial personality. Jack said he had started to read about the idea of behavioral finance in the newspapers and investing magazines. I said that behavioral finance should be the foundation of the bank’s approach to customized communication and to the recommendations they make.

Ultimately, our conversation ended with me suggesting to Jack that he ask each of the banks and financial advisors he interviews:

What formalized processes do they have to implement a behavioral finance approach which will help him achieve his goals?

Further, have the processes they use been built and tested by a reputable and independent supplier of behavioral systems or have they been developed in-house to fulfill “tick-the-box” requirements?

The Key Features of the Ideal Financial Planning System Powered by Behavioral Finance Insights

A few days later, at Jack’s request I gave him, in email format, a more specific list of the features that should be present in the financial planning service model to fit within the “new behavioral economy” age of financial planning:

Clear organizational messaging: the “why” and the “mission” for delivering a service that helps clients live a quality of life based on who they uniquely are, in harmony and without regret. Put another way, helping every client in a customized way to “Live with Meaning.”

Completion of an online activity at the banks very first touch point with the client: to discover the client’s communication style and the desired client service experience using a robust scientifically validated process.

Customized first meeting experience with a relationship manager: someone who can naturally create the right environment for the client to share what they need and expect.

Assignment of a wealth management team matched to the behavioral style of the client: to deliver a service that matches what the client wants -financial planning, investment management, philanthropy, family business etc.

Completion of an in-depth online activity to comprehensively discover the client’s financial personality: the starting point – to reveal their natural instinctive behavioral style. This is not just a standard 5 to 20 question risk profile invented in the marketing department which can be manipulated and rarely tells the truth in down markets. Rather, a robust, scientifically validated process which objectively uncovers the client’s broader set of behavioral biases (including risk-taking) that strongly influence their decisions. Also, the financial personality reporting must be provided to the client for transparency with the comparison to the advisor.

Completion of a goal-based questionnaire addressing balance across the key areas of life: to prioritize the needs and wants to be factored into the financial plan and investment portfolio design. Ideally, each of the client’s specific goals is addressed in the portfolio design.

Real-time behavioral management of every client: during periods of market volatility on their unique terms. Use of online tooling to enable the client to monitor on a real-time basis their own “Market Mood” and patterns of behavior.

Bank compliance processes: providing real-time monitoring of the recommendations made to each client with respect to their financial personality, financial capacity, and goals. The client should know that the bank will use exception reporting mechanisms to ensure their advisors keep the solutions offered within acceptable boundaries.

Bi-annual review: conducted in person with the client or virtually using video.

An advisory team that serves as the Wealth Mentor of the client: they need to adopt a coaching approach through asking powerful questions that transform the clients thinking as they go through life transitions. Further, the firm and advisors demonstrate through this approach that the client is at the center of the relationship and not the bank’s fees.

Jack called me two weeks later and said that after extensive research and introductory phone calls he found many banks and financial advisors who said they delivered this service but actually did not. However, he was pleasantly surprised to find some leading banks and financial advisors were on this pathway. All of those firms on the right path were those using the Financial DNA behavioral finance platform developed by DNA Behavior International.

Jack made the decision to start working with the wealth management division of a large, well-known US bank. He added that his research had revealed large banks and financial advisory firms in Canada, Australia, England and Europe moving this way.

I said to Jack, that as banks and financial advisors realize that relationship building is about customizing the communication with clients and the solutions offered, then they will win. Those who think relationships are only built on rates of return will fall far behind. Conversely, banks and financial advisors who act as a guide to clients in the financial planning process, rather than dominate them with transactions, will, within the next 3 years, grab significant market share, as well as, reduce the business risks of compliance.