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Financial Advisor Success
Ep 454: Turning Abstract Behavioral Finance Research Into Practical Tools To Better Client Outcomes with Dr. Daniel Crosby
01:30:00
How understanding money personalities and flourishing goals can lead to deeper, more effective client relationships.
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Welcome to the Financial Advisor Success Podcast.
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Where you go behind the scenes with financial planner, speaker and consultant Michael Kitces.
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To hear stories of how leading financial.
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Advisors navigated the inevitable challenges that arise on the path to success and get.
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Insight from leading industry consultants about how to break through to the next level in your advisory business.
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And now, here's your host, Michael Kitces. Welcome everyone. Welcome to the 454th episode of the Financial Advisor Success Podcast. My guest on Today's podcast is Dr. Daniel Crosby. Daniel is the Chief Behavioral Officer of Orion, a technology platform serving financial advisors. What's unique about Daniel though, is how he has turned abstract behavioral finance concepts into practical tools advisors can use to understand their clients relationships with money and to help them set better goals. In this episode we talk in depth about how Daniel helped develop a tool to analyze where individuals fall across five dimensions of one's money personality, spending today versus saving, directness of communication about money, worry about money, an individualistic versus collectivistic approach toward money and the importance placed on money and wealth. Why Daniel finds that there is a tendency for those on one end of the spectrum on a particular dimension to judge those on the other end. For example, a spouse who tends to be a saver might judge a more spendthrift spouse for not saving for the future, while the latter might think the savers habits are limiting their enjoyment of today and why Daniel ultimately finds that neither end of each dimension is necessarily superior and how advisors can help clients identify potential blind spots if they fall at one extreme or the other. We also talk about how Daniel has helped develop a tool that allows advisors to incorporate positive psychology principles into the planning process to better understand what makes clients flourish. How Daniel has clients rank the importance of six items related to flourishing, including leisure work relationships, meaning personal growth and physical health, and then rate themselves on how well they're doing on each item and how Daniel finds that identifying divergences between these scores, for example rating relationships as important but giving a low self rating on it can help advisors and clients identify potential financial goals that could lead to greater flourishing. For example setting aside money for a major family vacation and be certain to listen to the end where Daniel shares why he thinks one of the best uses of behavioral finance for financial advisors is to take a step back and consider how their own attitudes towards money might influence how they communicate with clients. How Daniel finds that having an understanding of an advisor's own attitudes towards money can help advisors avoid coming across as judgmental. One of the key hurdles for individuals considering whether to approach an advisor and ultimately lead to more and stronger client relationships. And why? Daniel thinks that beyond behavioral finance tools, the practice of listening carefully to clients can help advisors uncover the underlying reasons for clients seemingly suboptimal financial decisions and allow the advisor and client to move forward from a common understanding of where the client is coming from. And so with that introduction, I hope you enjoyed enjoy this episode of the Financial Advisor Success podcast with Dr. Daniel Crosby. Welcome Dr. Daniel Crosby to the Financial Advisor Success podcast.
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A
Michael, good to be here. I've been looking forward to this.
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B
I'm really excited to have you joining us today and to get to talk about, dare I say like nerd out a bit on behavioral finance, which I find this is a topic. I mean Root Large has just become more and more prominent in the industry over the past decade or so. I feel like in part sort of spawned by all the technology evolution. Like first it was the robos, now it's AI or like coming forth to threaten financial advisors and maybe at the least just automate more bits of investment management and maybe even some of the financial planning work we do for clients. And then most of us as financial advisors will quickly retort like, yeah, but technology's not going to talk my clients off the ledge when they're freaking out in the down market, which we sort of connect back to behavioral finance for various reasons. Clients make suboptimal financial decisions and hopefully we as financial advisors can improve upon that for them. And at the same time it's been fascinating to me because at least my experience, clients themselves are often less receptive to this as a value proposition. Like yes, they may make their so called irrational decisions, but that doesn't mean it's helpful to throw in their face and say like, you know Mr. Client, you're being very irrational right now or you should pay me 1% year because someday you're going to make a really stupid decision. I'm going to save you from it. Like it may be totally true. Seems a little bit difficult to get clients on, on board with that perspectively even as advisal advisors, like we have all seen firsthand how much clients need the help when those moments come. So I tell you, I guess I just, I'm like, I know you as someone that has spent essentially your career on all things behavioral finance pretty much all applied into the financial advisor domain of what we do with clients. So I just excited to say to get to dive deep into this, like what does it really mean to help clients with behavioral finance? And maybe like how do we help clients get More buy into it. Or maybe that's not even a good objective. We just have to help them with it. Who cares if they wanted it, they'll appreciate it when they get it.
- [05:13]
A
Yeah, well, you've done incredible work in this space too. And I'm confident we're going to have a lot of fun nerding out.
- [05:20]
B
So as we dive in, I think just for starters, it would be helpful to give folks who are listening some context into just who is Dr. Daniel Crosby? Like, what do you do? Where do you work? What is your firm? Like, just help us get some context of where you are and what you do now and then we'll talk a little bit about that journey over time and just the behavioral finance things that you get to do in your work.
- [05:48]
A
Yeah, happy to. So I think it's important to start at the beginning. So I am a clinical psychologist by education. I went, I went to school ostensibly to help people with eating disorders. That was really the thing that initially drew me to the world of psychology. And so I, you know, I went, I entered my freshman year of college thinking I was going to be a financial advisor like my dad. And after my freshman year of college, I went on a, I went on a two year mission for my church and I spent two years in the Philippines and in Manila. And when you're a kid from Alabama who, who finds himself in Southeast Asia for a couple of years, you learn a lot about life and culture and the way that different people live. And so I came back from that two year experience just absolutely fascinated with human behavior. And so then I set out on this course to study psychology. When I re enrolled in college, I said, look, I'm going to study psychology. And I love that. And about this time, someone important in my life had an eating disorder. And I became sort of a liaison between her and the doctors that were helping her and her family back home. And so the combination of this friend who was hurting and the mission experience just made me fall in love with the study of human behavior. Well, we can talk a lot more about this, but the short story is I burned out rather dramatically. I was 23 years old when I started doing psychotherapy, which I think we can all agree, Michael, that 23 year olds have a lot to teach the world about how to live a good life, wouldn't you say?
- [07:32]
B
Oh, yes, yes, absolutely. I mean you're like 20, 20 odd years in, you've basically mastered it. So. So much to teach the world. Absolutely.
- [07:42]
A
Yeah. I had, I had basically nailed it at 23, no so I mean, you know, from 23 till I finished my PhD at 27, I, you know, I was doing therapy and I just burned out. And so that is, you know, rather circuitously what led me to say, hey, I love studying human behavior. I know that I want this to be part of my career, but I don't think I can do it in a medical context. And so these days I work at Orion Advisor Solutions. I'm the Chief Behavioral Officer there. And to Orion's great credit, they saw the power of integrating behavioral finance, especially into technology, into, into the way that we educate advisors. They see the importance of this and they've given me this really cool role that there's not a whole lot of in the industry. And so that's my, that's my day job. I work at Orion and build training and technology and tools for advisors.
- [08:39]
B
So can you, can you talk about that a little bit further? Just, I mean really like what do you, what do you do as Chief Behavioral Officer? What, what is that, what does that mean? What, what projects or things are you actually doing like day to day, week to week, month to month in the organization?
- [08:58]
A
Yeah, it's a, it's a great question. It's a question that many people have, including, including my mom. You know, my mom asked me, my mom asked me with some regularity, what is, what do you do again? So there's, there's really about three parts to my work and I call it training, tools and technology. But you know, a, a big piece of my work is being sort of an external representative for Orion at conferences, to the media and to other places. Do a lot of conference speaking. You know, I'm frequently, frequently running into you sir, at one conference or another. We're both very busy that way. So I do a lot to talk about the firm and represent the firm externally. That's maybe the biggest part of my job. Internally I do a few things. We have a whole suite of behavioral finance enabled tech tools that are baked into our planning, our planning process. And that has been really, really fun, you know, for, for most of my career. I've been at this for about 13 years in finance and for most of that time, most of what I did was speak at conferences, write books, write papers, do research, and that's good and you know, that'll always be part of what I do. But there's a certain lack of scale to that. And you know, we could certainly talk about the knowing doing gap and how little of what people hear at a conference or read in a book actually gets implemented. So technology being as ubiquitous as it is, and the fact that technology just sort of operates beneath our awareness and sort of runs in the background, means that if you can bake some behavioral insights into a technology, sometimes that adoption gets a lot easier and clients get the benefit of that behavioral insight without it being delivered in sort of some obvious ham handed way like you talked about earlier, where people aren't really open to that. So technology enables, I think, the delivery of behavioral insights in a really cool way. So Orion has been a wonderful playground for me in that respect. And then I do. This is probably the smallest part of what I do, you know, especially with my colleague Dr. Naomi Nguyen, we're starting to get into doing some research and creating content, writing papers, and we're in the very early stages of sort of doing that original research.
- [11:21]
B
Okay, so I'm interested to hear more when you talk about this phenomenon of where we're trying to like bake elements of behavioral finance, behavioral insights into tech. Like can you give me examples of things you all have been doing or building? Like what, how does, how does that actually show up in practice?
- [11:46]
A
Yeah, I'm happy to talk about that. I think I'll start with the very good point that you made earlier that's been supported by a lot of research that Morningstar in particular has done a really nice job with. They have an excellent behavioral team as well. But you know, this Morningstar research, when they, when they survey end investors on what parts of an advisor's value stack they value, you know, what parts of what the advisor is bringing to their life do they value the most? The things that are obviously sort of emotional or behavioral in nature are consistently at the bottom of what clients report valuing. You know, things like survey responses like my advisor helps me not make irrational decisions or my advisor helps rein in my strong emotions are consistently near the very bottom of that stack. And the reason is just what you stated from the outset. No one likes to think of themselves as being silly or hot headed or emotional or in deep need of some reining in. So even. Go ahead.
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I was, you know, like, I really do find that an un. An interesting phenomenon that, you know, we, I mean we've all collectively agreed as advisors, right? Like the hand holding and the talk you off alleged stuff like really matters. Because if you've been in the business any period of time and have gone through at least one nasty market volatility bear market cycle, you've had at least one or two of those scenarios. Like you can literally see firsthand the impact you have had on a client to help them not exit a market at the bottom. And when markets are not volatile and times are not difficult, it is ridiculously challenging to convince clients that this is a valuable, useful thing because they, you, you basically have to convince them that they cannot actually control their own emotions and decisions in, in, in some distant future moment. And most people just don't seem to really want to admit that about themselves. I mean, even if it's true, like it takes, it takes a lot to convince someone that they can't handle themselves. And at some point it's easier to be in denial that you can't handle yourself than say like, yeah, I'm really a total hot mess, I should just give you all my money. And so I feel like we get to this point where when we try to convince clients on the behavioral finance merits alone, even though we all know it works in the moment when, when we're not in one of those moments, we're like, we're basically fighting against clients willing, like denial, willingness to admit that they might actually have a problem with this.
- [14:35]
A
Yeah, so you're, you're exactly right. And so, well meaning advisors who have read the research and I mean the research is very consistent that keeping, you know, if you have a long term relationship and you with someone and you, you keep them from making, you know, three to five really sell it, you know, sell at the wrong time type emotional decisions over the course of your professional relationship together that will most likely be the most value you ever add to their lives from a dollars and cents perspective. And yet the, the simultaneous truth is that no one wants to hear that because it requires them to make some admissions about their own fallibility and their own brokenness, really hard for us to make. And so I think advisors who sort of pound the table on this or are overly emphatic or overly sort of transparent about that being their biggest value add, they're asking the client to accept something that is nearly impossible to accept. But if you, but if you look at that same Morningstar data and you look at the top, top of the list, it'll say things like, you know, the things that they value the most are clear communications and helping me think through and articulate my goals and re, you know, helping me reach financial goals. Well, what I want to say is that that's all behavioral too. You know, the, the articulation of a goal requires a whole lot of behavioral finesse. You know, the increasing the salience and the vividness around that goal. That's a behavioral Consideration as well. So we've had this really one dimensional view as an industry of behavioral finance as being people are stupid, people are broken and irrational. We're the last, you know, we're the last.
- [16:21]
B
We'll save them. Correct it feel when you're going to be the savior. Like I, yeah, I want to be, I want to be the one that saves them. They'll be forever grateful. It's wonderful, correct?
- [16:31]
A
Yeah. So it's this huge thing and it sets up a massive. It, it exacerbates the existing power differential. It sets us up as saviors. The clients can't hear it like, there's all sorts of problems with this. So that's why I think technology is so powerful. It's just kind of there. And you can have behavioral sophistication within that technology in a way that isn't like you're sick. Open up and take this medicine.
- [17:00]
B
So then take that one step further with us. How does this get baked in the technology then? What are you doing in technology that makes this show up different or better than the versions that we've been just talking about here?
- [17:17]
A
Yeah, so I think there's subtle and less subtle manifestations of this. On the, on the subtle piece, things as small as the colors used in the technology, the wording of a question, the phraseology on, you know, a risk tolerance questionnaire or a get to know you questionnaire, the sequence in which different parts of the tech are presented to the clients, all of these things have a dramatic material impact on how that client responds and their experience. So things as small as the things I've just mentioned are really, really large in fact. And I think technology providers are wise to consult with people who are knowledgeable around these things. The more obvious, more sort of explicitly behavioral stuff, some of the stuff we've built, there's a handful, so I'll talk about a couple of those ones. Is sort of a personality assessment, for lack of a better word, a sort of personality assessment for your financial values. I did research a few years ago where I talked to over 400 couples about what do you fight about when you fight about money? I, you know, I worded it a little more elegantly than that, but that was, that was effectively what, what I was interviewing these folks about. And we entered into this conversation with sort of one set of assumptions and one goal which was that marital money spats are, depending on who you ask, either the biggest or one of the biggest predictors of divorce and separation of just about anything out there. And so we thought, well, we as an industry are in a position to keep the love alive and keep families together by helping people better communicate about money. And that is still the case. But, but what we found was there were five. There were five sort of continua. There were five dimensions where people were consistently running into conflict. And what we found is the conflict existed because these were deeply held values. Like these were, these were, these were. People were fighting about this because they felt strongly about it. And often they had come to these assumptions or these beliefs about money uncritically and in sort of an unexamined way and that they had inherited from their culture or from their family of origin. And, you know, whatever you grow up, like that's your normal, that's your homeostasis until you move in with someone or you get married, and then your money world is brought into sharp relief with the financial attitudes of another person and yikes, what do you know? There's conflict. Another thing we found across these five dimensions is that even when there's not conflict, there can be group. Think of the five dimensions, the one where we found the most conflict was whether money was best used to enjoy today or to secure tomorrow, right? So people are strongly decamped typically into one of these, one of these sides or another that like, hey, money is for yolo. Like, money is for living Today, it's a beautiful day, tomorrow's not promised, let's get it. Or, you know, we've got to sock this away, we've got to save it. And what we found is, first of all, that the two camps are very judgmental of each other. And second of all, if you look at a couple, I'll use my wife and I as an example. My wife and I are both soundly in the save for tomorrow camp, right? So I'm the son of a financial advisor, my wife's the daughter of an accountant. And like, we both fantastic. Yeah, we're both squarely in that camp. So what that means is we don't fight, but we have unexamined problems, right. If left to our own devices, we would save and save and save and ignore opportunities for seizing the moment and living that beautiful day. So I think the truth is found in moderation. So we found these five dimensions. We found these five dimensions. We found that you're either prone to groupthink or disagreement. And we were able to create a less than three minute assessment that'll give individuals and couples a sense of their financial values. And then we can actually plug this into AI and infuse it into our Reporting. So you have a deep understanding of someone's financial personality. Now you can create custom, now you can create custom reporting that speaks specifically to who they are, how they communicate and what matters to them.
- [22:24]
B
So what are the five dimensions that you are building around here?
- [22:29]
A
Yeah, let's get it. So the first one is communications. So you know, we, we found that people fall broadly into two camps, direct and indirect. Certain people really are very comfortable talking about money. And I think and others grow up with this idea that it's impolite, that it's gauche, that it's tacky. And again, in all five of these people have strong feelings about the people in the other camp. And in both cases, I think a lot of times advisors will hear something like this and go, oh well, I want to work with the people who are direct communicators. But we actually found strengths and weaknesses with all five of these styles. So for instance, the direct communicators can often confuse talking about it with being about it. You know, it's like, oh well, we talked about it and think that that is enough to get it done or that talking about it is tantamount to, to you know, getting it accomplished. And we found that sometimes the talk is, is just talk. And then of course there's I think obvious problems with, with not talking about it. You get wrong headed assumptions, things get swept under the rug. But communication was, that was that first level. The second level was, was worry. Some people are, you know, deeply concerned and think daily about their finances and other people really don't. And it is largely independent of wealth. Like, I mean some people are just sort of wired to worry more than others. And some people, even people of means, just, just worry a lot.
- [24:13]
B
That's like a version of big five neuroticism. Like that, that same anchor point. Just like some people just naturally get more worried and anxious about the stuff that's going on and others don't.
- [24:25]
A
This is, this is why I love you, Michael. Yes, it is just like big five neurotic. It's a ton like big five neuroticism. And if folks don't know the big five personality measures, please go check it out because it's the best thing going in terms of measuring personality. But yes, it's a lot like neuroticism. It absolutely is. And so for again we think, oh well, I want to work with the people who are low on worry. They seem chill and fun. But the people who are low on worry tend to have inadequate insurance, they tend to have inadequate savings. You Know, things like that. So there's, there's, there's this horseshoe element to it that any sort of strength overextended becomes a weakness. The third dimension was that time, you know, the time dimension I cited earlier is it, is it better to enjoy today or to secure tomorrow? And of course, I think the real richness is found somewhere in between those things. The fourth one was the only one where we had a gender based, a gender based and sort of a culture based dimension. Most of the others are fairly evenly distributed. The fourth dimension was, is money viewed as an individualistic or a collectivistic? Good. So, okay, so in the one camp we've got folks who say, this is my money, I earned it, it's for my use. You know, sort of put your own, put your own air mask on first if the plane is going down. And they emphasize hard work and responsibility. That's all, you know, that's all good stuff. There's, there's an element of reason to that. In the other group, we find that people think that this is, this is a collective good, right? If grandma needs her light bill paid, like that's on me, like I got, I gotta help with that. If my sister is going to college and she's short, you know, she's short on rent, like I should contribute to that. And this one gets really thorny. Like this is a point of real, real disagreement for a lot of folks.
- [26:41]
B
And, and you said this, this skews gender and culturally. Can you talk a little bit more about where the, where the skus are?
- [26:52]
A
Do you, do you have a guess anecdotally? I mean, I, I'm happy to talk about it. I'm just curious if you have a guess anecdotally.
- [26:58]
B
I, I mean, my, in part because I'm looking around at our financial advisor, industry itself and like, I, I feel like there is a more male gender tilt towards individualism and a, and that women tilt a little bit more towards collective.
- [27:19]
A
That's, that's what we, that's what we found. Yeah, that's what we found. So non white, non Western women tended to be more collectivistic in their thinking and white Western men tended to be more individualistic in their thinking. And again, both, you know, both taken to extremes can be problematic because at the one extreme of individualism, you know, you're really missing out on some opportunities to help others and to bless your own life. You know, I just wrote a whole book on sort of the, the positive benefits of gratitude and philanthropy and charity and being generous. It's One of the few ways that we can reliably buy ourselves happiness with our money is by lifting other people. And you're missing out on that if you're too individualistic. But on the flip side, if you're, if you're too collectivistic, if you take that to its sort of logical extreme, then you're penniless and you don't take care of yourself and you're not even sort of meeting your own needs and you can't fill others glasses when your own pitcher is empty sort of thing. So finding that nuance is really critical. Finding that middle ground.
- [28:37]
B
I mean, I'm struck by it again when practically speaking we are living in an industry where three quarters of the advisors are men, almost all of whom are white men. Like just if individualism disproportionately maps onto the prototypical financial advisor, to me, it implicitly means we are more likely to have challenges and issues with any of our clients who do not share that belief. Which frankly, I can think of instances with clients over the years because I'll admit, like, I certainly fall into that individualism. Camera just to like put your own air mask on first before you help others is very resonant to me.
- [29:31]
A
Yeah. For me as well. And you know, you make a great point there. Jason Zweig has this great bit, I hope I quote him correctly here, but you know, he has this great piece on the best use of behavioral finance is not as a window onto other people's behavior, but as first and foremost a mirror onto our own behavior. My fear when people read one of my books is that they're going to get sort of caught up in the quirkiness of human nature and use it as a gotcha for the clients they serve or to point out the irrationality in their spouse or their kids or their clients or whatever. I think the highest and best and primary use of behavioral finance before we can take that second step is to look at ourselves and go, okay, well me, Daniel Crosby, I'm a middle aged, I'm a middle aged white man from the deep south, all of that comes with a very particular set of assumptions. And you know, I lived in the Philippines for a couple of years and if you, if you were a financial advisor to a first generation Filipino couple and you were telling them that they couldn't send money back home or they.
- [30:43]
B
Yeah, don't. Your kids can borrow for college, but you can't borrow for retirement. You have to save for your retirement before you help your kids through college.
- [30:53]
A
Yeah. Or that grandma or that grandma needs to go to an old folks home, like none of this would land and they would think you were monstrous. And you know, we have to know the place from which we're giving advice.
- [31:10]
B
So what's the fifth dimension then?
- [31:13]
A
The fifth dimension is importance. So we found that for about half of people, their wealth is a material means by which they keep score in, you know, what kind of how when they ask themselves the question, you know, how am I doing? Like, am I living a good life? Like, you know, which we all ask. This is a very sort of fundamental existential question. And about half of people answer that, at least in large part by looking at their bank account. And then about half of people think it's completely orthogonal to anything to do with, you know, what kind of a person you are. And it's, it's interesting because, Michael, probably the number one question I get these days after, you know, many years of a good market is around decumulation, like I can't, you know, I can't get my clients to spend their money and why won't they fly first class? They have all this money and why won't they live a little? And for a, for a really large subset of the population, their net worth and their self worth are inextricably tied together.
- [32:22]
B
Right. I, I can't start spending it, spending it down because I need it to go up, because I need my score to go up.
- [32:30]
A
Yes. I'm the five million dollar guy. And if I have $4.8 million, then I'm no longer $5 million. Yeah.
- [32:42]
B
What fascinates me around these and the way that you frame them? Communication, worry, time. The individualism, collectivism, divide, importance. I mean, you'd said it earlier just like it's resonating to me now. These are not only spectrums of a financial behavior or money belief. I talk more directly or less directly. I worry or I don't. I'm more spent today, I'm more safe for tomorrow. It's that most people tend to gravitate to one extreme or the other. It's harder to find people in the middle. At least I feel like anecdotally and perhaps most notably, like the people at one extreme kind of tend to demonize the people at the other end of the extreme. I mean, whatever dimension it is, if you're a hardcore saver, you shake your head at the senders and if you're a hardcore spender enjoying today, you shake your head at the savers who can't, can't enjoy their own money. And I think likewise across all of these, that they're like. They're not just a range of behavior. They're a range of behavior where we actually have some very strong, often negative feelings about people on the other end.
- [34:01]
A
Thank you. Thank you for the window to talk about that. If we. If we take the time dimension as a point of real friction for a lot of folks, people in the Spend Today camp Enjoy the Moment camp, they look at people in the Save for Tomorrow camp and they go, these people are lame. These people are no fun. They're a stick in the mud. They're a wet blanket. They're a fun hater. Whatever. On the flip side, people in the Save for Tomorrow camp look at the Spend for Today camp people and go, wow, they are unserious. They're frivolous. They can't be trusted. They're wasteful. And we look at this with so much judgment instead of saying, hey, this is part of the. Part of the truth. There's probably something I could learn from this. There's probably something you could learn from me. Let's meet in the middle. And again, when you think about this in the context of a romantic relationship or even, like, you know, let's say a grandparent leaving money to a grandchild, you know, we use this assessment a lot of times when there is money in motion to say, hey, why don't you get clear on your expectations and your priorities and your preferences? Because, yeah, when. When grandma gives you this money and then you spend it on a year walkabout so you can, you know, on a gap year to go find yourself. And, you know, your. Your grandpa and your grandma go, what the hell? This isn't. This isn't what that was for. You know, there's. There's things we can learn from each other, but we. We are so rooted in our. In our homeostatic set point, in the way that we grew up, that we cannot. That we cannot see the other side. And a lot. You know, Carl Jung has this great quote that, you know, until you make. I'll paraphrase. Until you make the unconscious conscious, it will direct your life and you will call it fate. And that's what I feel is the biggest gift we give to people when we make them aware of these preferences. It's like these things have been operating in the background of their lives, unspoken, unhighlighted, unarticulated, and they're just driving their behaviors in ways that are unchosen because they're unknown to them. And so when you bring it to their awareness. When an advisor brings us to their awareness, then you can do something about it. And you can work with your spouse to meet in the middle or at least understand where they're coming from. And it's not a place of being a fun hater or a spendthrift, but you know, it's likely just how they grew up.
- [36:35]
B
And so you ultimately build like an assessment tool for advisors, like put clients through to measure themselves on the five dimensions and understand how they're showing up.
- [36:50]
A
That's right. It's a 20 question assessment. Takes just, just under three minutes on average. And you can take it individually and you know, we'll give you kind of the rundown on who you are or you can take it with a loved one and we can plot your spot on each of these five dimensions relative to your loved one. And then what we do is in cases where there's a high degree of similarity, you know, like there is with myself and my wife, we go, hey, you know, Daniel, Daniel and Katrina, you two are both in the safer tomorrow camp. What you may want to do is consider opportunities to live in the moment because if not, you're going to wake up with a pile of money and not a whole lot of memories. It's a little more elegant than that.
- [37:36]
B
Right.
- [37:37]
A
But then if you're in the divergent camp, like if you and your loved one find yourselves in different camps, the language is all about understanding, bridging the divide and avoiding conflict. So what's interesting, if you look at the psychological literature writ large, we find that psychologically diverse teams, there's a lot of talk about gender diversity and ethnic and religious diversity. But if you look at a psychologically diverse workplace, a psychologically diverse workplace tends to have more fights and take longer to make decisions. But if they can overcome that tendency to squabble, they actually make better decisions, they make more money and their businesses do better. But you have to learn to overcome that disagreement.
- [38:28]
B
Yep. It's one of the comments I actually make a lot internally with our team. Like just even on the Kitsis platform, we spend a lot of time thinking about how to have a diverse workplace of views and thoughts and ideas in particular. Right. We're, we're building a lot of novel new programs. We're, we're trying to create original content. Like just takes a lot of perspectives to vet and test a new idea. And one of the things that I had long observed is like, wow, yeah, when you get people with really diverse perspectives in the room, like they fight a lot more and Stuff slows down on because they've got to fight and hash it through. Like things get done really fast. When you group think they're like, hey, what do you think of this? Everyone's like, yeah, it looks good, great. Like you get stuff done really quickly and then you don't really particularly test your ideas and you get blindsided. More diverse perspectives we have certainly found, kind of put ideas through the crucible and get to better outcomes. And I feel like the part that at least no one previously had reflected to me until we started building this is oh yeah, and like decision making is messier and stuff happens slower and there's a non trivial amount of tension sometimes that you have to navigate through because as you know, like people come with some pretty strong held beliefs sometimes. So if someone else in the group is going to really challenge them like that can create some friction in the group or amongst the team that you have to be prepared for or navigate through.
- [40:03]
A
Yeah, it's. Whereas, whereas a group that's psychologically homogeneous will joyfully lock hands and walk right off a cliff. Right. Like the outcome, the outcomes, the outcome's not as good, but the process is a lot cleaner. You know, Michael, my first job out of grad school, I did this for two years was actually pre employment assessment of financial executives and healthcare executives. So I would give them IQ tests and personality tests and you know, tell the organization whether or not I thought they were a fit to hire this person. And sort of my observation now this is, I'm rounding here, this is imprecise but I feel like you want someone who shares, you know, call it 70, 75% of a cultural fit. If you hire people who are, you know, clones or automatons, you're, you're not getting that diversity of thought. But if you hire people who are such mavericks that they're totally, you know, on the other side of everything and they can't even see your perspective, that's chaotic and disruptive too. So I think you want to, you know, it's an imprecise process but you want to look, people look for people who have a good degree of overlap but not perfect overlap to keep the organization running and growing.
- [41:24]
B
So, so for advisors who like, who are hearing this and actually want to try it with clients or, or perhaps themselves and their significant other as a test case, where is this found? How do people access it? I mean, is this a standalone thing from Orion? Is this available separately? Is this built in? Where can someone try this if they actually want to try it out?
- [41:49]
A
Yeah, the Name of the tool is the B520 Behavioral Finance 20 questions and it lives inside of Orion planet. So. So those who have Orion planning have access to it. Okay. And that's where you would try it.
- [42:04]
B
Out though speaking of sort of folk organizations, groups that may be fairly homogeneous on these. I mean, what is. When I look down these, I'm like pretty sure I can peg the average financial advisor on all five of these.
- [42:20]
A
Oh yeah. Oh yeah. And who they want to work with.
- [42:24]
B
Yeah. Like we are direct communicators. We are, we are low worriers because we have to be the anchor rock for our, for our clients. We actually found that we did a separate study a couple of years ago around big five personality traits as they map on a financial advisors and found like advisors are actually not tilted in any particular way towards being extroverted, even though that's the stereotype. The thing we are like multiple standard deviations off the norm is we are extremely low neuroticism. Which basically means like we're really emotionally stable compared to the average person out there. Which I'm like, well yeah, when you have to sit across some clients who are venting all of their frustrations on a. On a regular basis, like gotta be fairly emotionally anchored or it just gets hard to work with clients because they're. Your emotional volatility becomes your emotional volatility and constraining. So like I'm just like going down these advisors or direct communication Low worry. We're clearly safe for tomorrow tilted. I think at least as a group we are individualistic tilted and we're probably somewhat money wealth importance.
- [43:39]
A
High importance. Yep, for sure.
- [43:40]
B
Tilted nailed it. Right. It's why AUM is a dominant metric in our, in our industry. Just like it is what it is. So it fascinates me that okay, and then I pulled this out and like advisors probably very disproportionately not even just have a loading on some of these, but have like a very specific sequence of five that we likely score on which would create, well, conflict with almost anyone who doesn't align with them. Well, right. If my clients won't talk about the money things with me, it's kind of hard to do financial planning. High worry clients are very stressful because they're constantly calling us and getting worried. People who spend everything today and don't save for tomorrow don't make great clients. Lots of conflicts around individualism versus collectivism. I'm just thinking of literal things that I know get said around our industry. Things like your kids can borrow for college, but you can't borrow for retirement. So you need to save for your retirement first and, and then help the kids through school. Right. Which is a very individual versus collective divide. I feel like the only one where maybe it's not contentious is the importance dimension. I suspect we skew towards wealth importance, but I don't know that we necessarily implant that on clients or have troubles working with clients who don't load on that dimension. But we're, we're strong on four and it's hard to work with clients who are not the same as us on all four.
- [45:19]
A
Yeah, it's an excellent breakdown of where I think the industry sits. And even if you go back to your research on where advisors sit on the big five, I mean, all else equal, I would take low neuroticism over high neuroticism. Just as like a nice way to live a life and to work with clients. But even something like that is not value free because people with low neuroticism can sometimes be low empathy or come off as aloof or indifferent. Because if you're never worried and someone else is, is more neurotic than you are and comes to your office and is really, really upset about tariffs or what, you know, whatever the, the tragedy du jour is, and you feel distant or unconcerned or can't connect with that feeling they're having, that's a problem. So like even knowing that, like, hey, I'm low neuroticism, that's, that's mostly good because I'm not giving my clients stress contagion. I sleep well at night. There's a lot of really wonderful things that come along with that. But hey, I need to know this about myself because I need to be on guard against looking, you know, as someone who lacks empathy when someone who is truly worried walks through my door. So I think it's critical that we know these things about ourself and where we ourselves and where we sit along these continua.
- [46:37]
B
So now take us forward to. I guess there's other areas where you have been, I think, as you put it, like baking behavioral finance into technology. Like just the B520 here has been a fascinating example. So what, where else has this shown up for you guys as you're building.
- [47:05]
A
To give another example of a specific tool we've built. We've built this tool. I think increasingly, if I can just back up a little bit. We talked at the outset about this one dimensional view of behavioral finance and how the long and short of behavioral finance was you know, keeping people from making stupid decisions. The growth and the popularization of behavioral finance has in large respect, mirrored the growth and the popularization of psychology broadly. So, you know, psychology is only a couple hundred years old as a discipline. It started out with the study of brokenness and the study of deficit. You know, what psychologists started studying first is, you know, how your parents screwed you up, what makes you sad, what makes you depressed, what makes you anxious. And it was only in the early to mid-90s that we got this field of positive psychology. And positive psychology, you know, especially the work of Martin Seligman and others, is this idea that, like, hey, we need a science that studies what makes someone a great parent, what makes someone a great leader, what leads to human flourishing. And behavioral finance, I think, has been on that same trajectory. Like, we started out with this need to break from traditional econometric models. And the way you do that is by cataloging all of these deviations from rationality. Well, that's cool. And there's some benefit to, like, it's the funny stories. And there's benefit to that because we need to manage those behavioral risks. But we also need a science of, like, how can money be spent, saved, and invested in ways that lead to human flourishing? So with that as a backdrop, our newest behavioral finance tool is something called pulsecheck. And what we do is we take the six dimensions of flourishing, informed greatly by the work of Seligman and others, and we present them to clients. And we say, and we can talk about them in a second, but we say, look, here's the six things that lead to effectively a good life. They're not all going to matter to you equally at any given moment in time. So we use that technology to say, hey, here's the six things you need to live a happy life. Rank them in the order they're important to you. Okay? So then the folks do this. Rank them 1 to 6 in order of their personal importance at this moment in time. And then we say, okay, now drag this one to 10. How are you doing on this dimension? So, you know, we can. We can talk about all six. But, like, if one of the dimensions is relationships, like, for me, that would be my number one right? Now I got a, you know, wife who I love and young kids at home. So relationships are number one for me. And so I'd say, relationships are number one. And then it says, okay, drag it one to ten. How are you doing on relationships? And I go, seven. I travel too much, you know, I. Too many conferences. And so Then what it does is we do a little wizardry in the background. We calculate the biggest delta between importance and how it's playing out, and then we prompt them to set a financial goal to improve on that. So, you know, if my relationships are a 7 out of 10 and I want to move them to an 8 or a 9, I could say, you know what, I want to take my kids to Japan. Like, you know, I want to, I want to take my family to Japan because that's been on the list and that's going to cost, I don't know, whatever $20,000. So in order to kind of move the needle on this, sometimes there's a financial goal associated with that, sometimes there's not, candidly, but it's baked into our planning process. So they can sort of score themselves on how they're doing in terms of living a well rounded life of flourishing. And that's also integrated into a planning process. So if there is a financial dimension to that, they can set a goal around it and the advisor can check up on that. That. And that's what's so cool to me. You know, McKinsey talks about in their Wealth Management 2030 white paper, they're like, the future of advice is going to be effectively life coaching. I mean, I kind of hate that term, but that's the term they use. I don't have a better one. And so they say, look, as AI continues to commoditize many of the more technical aspects of our job, we're going to become bigger and bigger sort of disappointment, you know, life coaches and sort of decisional guides for our clients. And so what we're doing inside of our planning tool is measuring not only their financial wellness, but their personal wellness and bridging the gap between those worlds to helping them set financial goals that raise personal boats.
- [51:51]
B
So what are the six dimensions, six things that you're measuring here?
- [51:58]
A
Yeah, so the first one is, you know, call it sort of fun and leisure. You know, doing, doing fun stuff, taking a break, vacation, eating an ice cream cone, going to a movie. You know, the stuff that money can buy. Money is excellent at fun and leisure. The, the second dimension is engagement. So this is deep, meaningful work, like immersive work, not busy work, but like the kind of work that causes you to lose track of time. People don't typically think about work as being sort of one of the pillars of a happy life because we kind of like to roast work and talk about all the ways that it sucks. But work is an important ingredient in a life of flourishing. The third one is relationships. This is the one that the science tells us is the most predictive, is, you know, are you giving and receiving love? The fourth one is meaning. So meaning is working for a cause or a purpose that's bigger than yourself and your wealth. This could be religion, spirituality, philanthropy, teamwork, but just anything that kind of gets you out of yourself and puts you in an other focused way. The next one, the fifth one, is personal growth. So we are wired for achievement. We're wired for growth. We want to be better today than we were yesterday. So, you know, are you. Are you growing? Are you learning? And then the last one is your physical health and strength. So, you know, are you in shape? Is your weight under control? Are you exercising? Are you getting outside that sort of thing? So those are the six, like, fun work, relationships, meaning personal growth and health.
- [53:48]
B
So I guess, quick question on this. Just the work dimension ties into doing deep and meaningful work. And then you separately talked about meaning, like working for a cause or purpose that's bigger than yourself and your wealth. So I guess just. Can you. Can you help distinguish those a little bit further? For me, like, the separation between, like, work that is meaningful and meaning, where I'm working towards a cause or purpose.
- [54:21]
A
Yeah, so the. The engagement piece or the. The work piece would be around, you know, either your day job if you're still working, or, you know, a deeply immersive avocation if you're retired. So, I mean, it really could be like, I play guitar. I mean, it really could be something like, you know, I'm working at trying to get better at guitar. I'm working at woodworking, or, you know, something like that. And of course, there is some bleed there, right, because there's an element of personal growth in there as well. But, yeah, work is really more about how fulfilling is either your 9 to 5 or the way that you're spending your days if you're retired. Meaning would be more things, like if you believe, if you're a person of faith, like, how's your relationship with God? If you're spiritual, you know, are you. Are you reading books and getting out in nature and doing the things that meet those spiritual needs, this would be things like volunteerism and philanthropy. It's stuff that is higher power or higher purpose. And.
- [55:36]
B
So the assessment is ranking these and then reflecting back, ranking these, giving people, then score how well are you doing on the things that you ranked. And then it starts to spot gaps, opportunities to do things and change things in your life to help advance these. So I mean like per the name pulse check. How, like how often do you envision a questionnaire like this gets administered? Like, how often do you take this to do a pulse check?
- [56:14]
A
Yeah, I think there would be a high level of discretion here with the advisors and sort of life changes. You know, for me you could do this as much as every year, but you know, for someone in my situation where my job is pretty stable, my family life sort of is what it is, you know, you could do this as much as every year, but probably wouldn't, wouldn't need to. But I think this would be especially helpful for people who are going through a change or considering a change. So I think it could be life event driven. And then again, you kind of tie it back. Like, you know, maybe if your health goal is the one with the biggest delta, maybe you need to set aside some money to hire a personal trainer, but maybe there is no financial element to it and you just want to get 10,000 steps a day and you can do that on your own. But what I love about it and what our advisors tell us they love about it is it knits the client and the advisor together and it allows them in a very practical way. Right. I mean these are, these are the things that lead to a meaningful life. But it's not a woo woo thing I think, to have your client tell you that they want to get in shape and then you help facilitate that process and you check on it in sort of an empathetic way. So I think it's a practical way. One of the biggest concerns I get with a lot of the stuff that I do is they go, you know, advisors will say, hey, I'm not a trained psychologist like you. This may be overstepping. And in this case, this is client led, this is client directed. It's based on the science and I think it's imminently practical. So it gives advisors a way to talk about important, meaningful things that lead to client well being in a way that still feels pretty grounded and practical.
- [58:05]
B
Yeah, I mean, I have a lot.
- [58:07]
A
Of.
- [58:11]
B
Sympathy in our advisor world that as, as more principles of psychology are coming in, these questions start to arise of, you know, when, when am I no longer a financial advisor but serving as a psychiatrist or psychologist? I'm, I'm not trained as this, I'm not trained in therapy. These may or may not even be entirely comfortable questions for me because I got into this for the personal finance part, not the, not the psychology part. But I mean, at least what strikes me in what you articulated here Right. Just getting into these. Here are things that really drive positive outcomes in our lives and happiness drawn from the positive psychology research. I mean, to me, this feels like goal formation. Like, this feels like a goals conversation to me, which is very comfortable, standard domain for us advisors. It's not starting with tell me about your goals. Oh, you want to retire when. How much those kinds of conversations, it's, well, hey, here are things that are associated with positive well being and outcomes for us in life as human beings. Which of these are important to you? How do you feel you're doing on them? Okay, let's talk about those. Want more meaningful work? All right, well, what would you have to change about your current job? Do you need to leave that job? Do you need to leave that company? Do you want to quit the career you've had for the past 30 years and do this fun side thing that you've always wanted to do that you may not make much money at, but it's meaningful work in the, in the literal sense. Like, great, now let's figure out financially what it would take and we're going to make a financial plan for that. Like, I can, I feel like I can, I can build and map a lot of goals onto these and in some ways even, even more readily when clients start talking about, okay, well, meaning is the thing that's at the top for me. Okay, cool. How do you feel you're doing all that? Not well. All right, well, what would it take to be doing better on that? Like what, what might you do? And okay, now we're going to get down a conversation of maybe it's philanthropy, maybe it's religion, maybe it's something else. As noted, not always is there a financial tie into that, but often there is. And like now I'm eventually this is going to come back to some financial goals, which. Cool. That's what I do as a financial advisor. You tell me your goals and have a path to get you there in a financially efficient manner. I'm struck hearing these. This doesn't feel like we're delving into a therapy realm. To me this feels like another way to do gold discovery with clients.
- [60:58]
A
Yeah, I'm really heartened to hear that because, you know, if you think about a general practitioner, I think a lot of people don't know this, but about a quarter of all visits to a medical doctor, to a gen, to a GP end in a referral to some sort of mental health professional. When I was doing that work, that was one of the primary sources of our referrals. Is people who go to a doctor ostensibly for, you know, whatever physical symptom, and the doctor goes, oh, well, this is a byproduct of some, you know, mental problem. And they would come to us. I think advisors are right to be thoughtful about walking that line and should expect that some percentage of the presenting concerns that bring someone through your doorway are going to end in you going, hey, I'm going to help you with this. If you want some help with this other thing, you should go over here. And people like Megan Lurtz and Ashley Kwame have written really great stuff about what that line looks like. There's people who have done that work and go read their stuff. And so that's sort of point one. But point two is, yeah, you're not foisting your beliefs on theirs. Look, if something's important to you and it's not important to them, they'll rank it thusly. And if they think they're doing fine there, they're doing fine there. You're only. It's client led. And it's all about goals, discovery, and just a different way to talk about these things. And everybody wants to live a happy life. Everybody wants to live a life of fulfillment and flourishing. But I think most people find that concept to be very hard to get your arms around. And when you say to them, hey, this is what a happy life looks like. You do a little work, you have a little fun, you love some people, you work on something bigger yourself, you stay in shape and you try and get a little better each day, they would go, yeah, that makes sense.
- [62:59]
B
Yeah, yeah, I'm like that. I don't have a problem with those things. That sounded pretty good.
- [63:03]
A
Yeah. People like, when people hear this, there's such a deep sigh of relief to go, oh, this is nice. Like somebody cracked the code. And now my advisor is going to help me set aside 10,000 bucks a year for a personal trainer or a trip to Japan or, you know, whatever it is. And they care about me and they want me to get better.
- [63:23]
B
So now taking a step back for a moment. So I want to come back and understand a little bit more of your story and journey. Like, how do you get from. I was working on my PhD in psychology and kind of burned out on the clinical work and magical things happen in 20 years later, I'm chief behavioral officer at Orion. Like, help us fill in this path a little bit more. Like, how do you get from. Okay, I'm getting my PhD in psychology and I don't want to be a practicing Psychologist. What do I do now with my life and career?
- [64:06]
A
Don't you love this? And then some magic happened and I had a really cool career. Yeah. So, so I come to my dad. Right. And so my dad, to set it up. My dad is a wirehouse advisor in Alabama, where I'm from. And so this is whatever 18 years ago. And so I come to my dad, who I have always thought of, it must be said at the time as being like one part stock picker and one part salesperson. That was sort of my, my concept of his work.
- [64:43]
B
Okay, well, I guess that's pretty fair reflection of wirehouse advisors. I mean, particularly if you're back to the 80s and 90s.
- [64:52]
A
Sure.
- [64:52]
B
When you had been growing up in the household. I mean like that, that was the broker gig back then.
- [64:59]
A
Yeah.
- [65:00]
B
Pick stocks and get your book of clients to buy those stocks.
- [65:03]
A
Yeah, correct. Like, hey, I got, I got this hot dot that's got a nice, nice dividend. What do you think? Yeah, I mean, look, I, I came by that answer honestly. And so I, you know, I come to my dad and I present this, you know, my, my burnout to him and I say, look, I'm thinking about this. And he goes, you know, hey, look, I don't know what's out there in finance, but he says, I, I do know that there's, in my work, there's a lot of psychology. And he sort of talks me through, you know, my dad at this time does not know the words behavioral finance or behavioral economics. He's not familiar with that as a concept, but he knows that a lot of the value that he provides is through being a steward of his client's wealth and their emotions and helping them in that way. And so I sort of go, oh, interesting for that. Two years though. My first job is with a small consultancy here in Atlanta, where I now live, that did this pre employment assessment work. And this was the only company that would hire me. I was applying exclusively to business type roles, organizational psychology and the like. And everyone would slam the door in my face because they're like, you're a clinician, you have no experience in this world. Like, why would we ever. All you've ever done is clinical work. Why would we.
- [66:37]
B
Right, so you're, you're, you're, you've done clinical work across from individual patients who had psychological issues. Like, you can't help us with our business. You don't, Correct, you don't know business psychology things.
- [66:49]
A
Yeah. And I mean, to be fair, they were right, you know, to be Fair. They were, they were absolutely, absolutely right. But I had a gentleman take a chance on me and he was himself a clinician and someone had taken a chance on him and he had built this really nice business doing these pre employment assessments and training for, you know, a lot of like executive coaching, leadership development, organizational psych type training, but mostly pre employment assessment giving, you know, effectively IQ tests, personality tests and culture fit tests to, to finance and healthcare executives pre hire for big jobs for executive type roles. And so he took a chance on me effectively because someone had taken a chance on him and he knew that it was possible. So it really took that. I mean, he was probably the only person in the world that would have hired me for that role. And just basically I'm, I'm forever grateful for that opportunity. And it's really left me with this sense of wanting to do the same for other people because I do think everybody talks a good game about hiring for culture and for talent and then training for the specific skills. But I find that we're oftentimes really wed to the very specific skills. And I think there's very few jobs where rocket science or something where the skills are very hard to learn. I think for a lot of jobs, especially in our world of wealth management, I think most of the time we'd be smart to hire for personality and for talent and train for the specifics. So yeah, did that for a couple years. In the process of that developed some clients in finance and wealth management. And I found consistently that they were the smartest folks I was working with. They paid the best, they were smart, they were interesting, they were kind, and they paid well. And it was while doing that work that I discovered behavioral economics and behavioral finance as a discipline and began to read the works of Kahneman and Thaler and Dan Ariely and the books that were popular at that time. And I knew that I wanted to break away and effectively the way that I positioned myself and that positioning has remained is as a translator between the ivory tower of academia and the advisors doing the work. I think about my dad, right? So this wirehouse advisor in Alabama who, who has a vague sense that psychology is important in his work, but isn't familiar with sort of the nuts and bolts of that research. And if he read it, would have trouble sort of applying it to his life. So I've tried to be effectively a science communicator and a go between people much smarter than me, working at fine institutions of higher learning and then the advisors who sit with clients every day, who, who know that the behavioral piece is important, but may not know exactly what that looks like in applied terms.
- [70:15]
B
So where did you actually go next after the pre employment assessment, folks, to start doing this? What was the next job step on the journey?
- [70:29]
A
So the next job step was self employment. So for, for some number of years. My goodness, how many? Five or six. I was on my own, doing a great deal of writing. That's when I wrote my first books. That's when I was probably the busiest I've ever been on the conference speaking circuit was had a couple of organizations take a chance on me, put me on their speakers bureaus, turn me loose on these financial advisor roadshows to begin talking about these things. And I'll never forget the first. I was trying to get on the speaker's bureau of an insurance company and I was pestering the person who would be able to make that decision and try and get them to pay attention to me. I was all of 29 years old and not very, not a whole lot of experience. And you know, finally I said, look, I sent them this kind of exasperated email and I said, hey, I'm going to come up to your, I'm going to come up to your office, which was in Boston. I said, I'm going to come up to your office, get your folks together, I'm going to give you the best presentation you've ever seen. If you don't agree, I'll never bother you again. But if you love it, I want you to hire me and I want you to put me, you know, on your speaker's bureau. And I love that.
- [72:02]
B
I love the sheer initiative. Well, I guess. Did they take you up on the offer?
- [72:06]
A
They did. They did. They did take me up on the offer. So they took me up on the offer. I went up there, I did a good enough job to. I'm sure it would make me cringe today, but I did a, I did a good enough job that they hired me. They put me, I think I did 55 events for them the next year. You know, I mean, they just. Absolutely. I spoke at every Maggiano's in America. Oh, man.
- [72:30]
B
So this, this is one of the setups where like the insurance company makes you available to their advisors to do client events and prospect events. You're the draw to bring people in the room, that kind of thing.
- [72:42]
A
Exactly.
- [72:43]
B
And then you, you get paid like, like, I mean, were you on staff?
- [72:47]
A
I was not on staff.
- [72:48]
B
Are you. Do they pay you to get in front of all their advisors? Do the advisors like each pay you Individually, just like, what's, what's that gig? How does that play?
- [72:57]
A
Yeah, I got paid. I got paid corporately. I wasn't on staff. I had other, I had other clients, but they were, they were far and away my biggest client. And it was a mix of advisor, like client facing events on behalf of advisors and then. And speaking to groups of advisors. It was a mix of those two things. So that one moment of youthful audacity led to this series of events, which is where I met the person who would later become the chief, Ali McCarthy, who would later become the chief marketing officer at Brinker Capital. And Brinker was getting into behavioral finance. And so, you know, Ali, that was my first, you know, W2 job in the industry was after five or six years of being solo and, you know, doing very well on my own. Ali went from this insurance company over to Brinker. When she got to Brinker, they were in the early stages of exploring applications of behavioral finance to their world. And she said, hey, I, you know, I have just the man for the job. I worked at Brinker for two years before Brinker was acquired by Orion, sort of mid, mid pandemic. And yeah, so it was, it's. It's crazy to look back and think about how every good thing in my career was really sprung from that one moment of, you know, of both luck and grit where you say, look, just freaking give me a chance. And, you know, if, if no one had ever given me a chance, who knows, you know, who knows what I'd be doing today?
- [74:38]
B
So as you, I guess, just like reflect on this and the journey and the things that you built, like, what surprised you the most about trying to get advisors to actually use and apply the behavioral finance research.
- [74:55]
A
So I've been surprised to the upside about the level of enthusiasm for the work. I've been doing this for about 13 or so years, I think, and the level of enthusiasm for behavioral finance has been consistent and growing. And I would say that it's even reached sort of a fever pitch in the last year or two where it just seems like there's an explosion of tools and books and people doing the work. And I think it's really reaching kind of a fever pitch. So the enthusiasm has been consistent and growing. That's been really gratifying. But the, but the frustration has been, you know, all along like, okay, this is cool, but what does it look like in, in my work? And honestly, I don't know that I always had a great answer to that question. And it's, it's Only since I've been at Orion, and I've been able to infuse it into the tech and, and some of the ways that we've talked about that I've started to have a better answer. Because, you know, one of. One of the things that we know is that there's this knowing doing Gap. My. My favorite kind of sad example of this is that nurses smoke cigarettes at nearly double the rate of the general population. And if you ask, and I mean, don't do this, but if you, if you tap a nurse on the shoulder and say, hey, why are you smoking? You know, they would, they would go, yeah, I really shouldn't. Like, I need to. I need to quit. And they know better than just about anyone in the world the physical complications that come from smoking cigarettes. But, you know, they're paid poorly, they have stressful jobs, their lives are hard, and so they need a break, and so they smoke. And the same thing is true of our clients. You know, I don't. I think most people grasp the fundaments of good investing. They know they're supposed to be long term. They know they're supposed to be patient. I actually screwed this up somewhat recently, and it shows the knowing doing Gap. I had a friend come to me at a Christmas party. He's about 20 years older than me. He's entering retirement, and he says, hey, I want you to have a look at my statement, tell me how I'm doing and give me a little advice. Well, he kind of gives me his financial life. It gives me his financial documents. I live in Atlanta. There's a lot of concentrated wealth here. He worked for one of the large Fortune 500 companies here, and better than 80% of his millions of dollars was in company stock. And I said, hey, man, you can't do that. So tell you right off, you can't do that. So here's the name of three advisors. Give them a call. They'll get you sorted out. Okay. See him a few months later. Hey, did you call my folks? Nope. I kind of get angry at him, and I'm like, you're being irresponsible. You're being stupid. You know what I'm telling you is good. I get home, I fire off an email about, you know, Enron and GE Capital and all this stuff. And I'm like, look, these guys thought they had blue chip stock, too. Don't be a dummy. You're big. You know, you're endangering your family. Call my advisors. And I see him a couple months later, hey, did you do the thing. Nope. I go, hey, finally now I like my training kicks in a little bit and I finally do the right thing and I go, hey man, help me understand. There's nothing in this for me. Like, I don't make any money off this. Yeah, yeah, like I'm just, I'm just trying to help you, help me understand why this is, is proving so difficult for you. And he goes, you're asking, what you're asking of me is betrayal. You are asking me to be a traitor. Uh huh. And then he goes into, I was this poor farm kid, this company gave me a chance, every good thing in my life and you want me to stab them in the back. And I listened to him and I go, wow, thank you for opening up to me. This is rooted in some really wonderful parts of you. You are loyal, you dance with the one who brought you. You're a good friend, you're loyal, you're trustworthy guy, and I love that about you. And I said, and you know what you're doing is still dumb, so let's talk about that. And. But then Michael, then he was able to have that conversation, but we couldn't. It was never about the math. It was never about me diagnosing. It was never about the diagnostic piece of it. I could have told him all the biases that contributed to his concentrated stock position. He didn't need that. He didn't need the math, he didn't need the behavioral economics. He needed someone to hear him out and understand him. And once he was understood, everything went away. And that, I think is the contribution of psychology and a story that illustrates where I hope behavioral finance is headed. It's less about a cataloging of the endless ways we're stupid and it's more about this thing that's everywhere in the financial planning process. Helps us understand our clients because they know what to do and if we learn to see them the way they want to be seen, a lot of it's, A lot of times it's self correcting once we have seen them.
- [80:04]
B
So what was the low point on this journey for you in trying to build a, build a business, build a career around this?
- [80:14]
A
There were multiple low points early. So trying to make that initial transition from clinical to business psychology felt candidly hopeless for what felt like eternity wasn't actually that long, but felt like a very, very long time. Then there was this transition into trying to scale my work a little bit. Like lots of frustrations at various points along the journey of just feeling like I'm Spending a lot of time away from family. I'm getting very fat on garlic bread and I'm not sure that any of this is sticking. I feel like it's useless. And even adult learning theory would tell you, you know, if someone hears a talk like you or I give. If someone reads one of my books, you know, not a whole lot of it sticks. And so there was this feeling of just running in quicksand for, for many, many years that I was making all of these sacrifices to be away from family, to do the hard work of writing a book or the like, and then just feeling like it was all sort of, sort of dying on the vine. So those have been, those have been the biggest points of frustration along the way is trying the same thing that makes this work fascinating, makes it maddening, which is, you know, the infinite complexity of the human animal makes this work that never gets old. But it also, it's not physics. Right. Like, it gets really frustrating sometimes because it feels like you're not making a difference difference. And I think a lot of advisors can probably empathize with that for, for many of the same reasons.
- [81:58]
B
So what changed that suddenly like it was less quicksandy and it felt like the impact was coming.
- [82:05]
A
Well, part of it is I got better at drawing a straight line from theory to practice. When I look at. I found one of my early presentations the other day, like one of the very earliest presentations I gave. And I believe that it was a 45 minute time slot. And I think, Michael, I had 70 slides and there were sims we make.
- [82:31]
B
As early stage speakers.
- [82:33]
A
Oh my goodness. And I think there was like a lot of Nietzsche in there. Like, I think there was a lot of Kierkegaard and like all this dorky stuff that I love. I mean, I still love it, but I think I was just deeply, you know, I was from that academic world. You know, I was really in love with philosophy and theory and didn't initially do a very good job of translating the. So what of that? And that's been something I've really, really tried hard to do. The other thing is I think the commitment level of advisors has risen. Like, advisors have seen that this isn't going away. They've sort of redoubled their efforts to get, get good at this. So I think, you know, the advisors I serve have certainly tried to meet me halfway. And then the, the third thing I would say is just the, the technology, right, the technology piece. It's such an easier conversation. You know, you talk about something like pulsecheck, this thing Takes, you know, less than five minutes to have this conversation. And it's so much easier than me trying to disseminate to an advisor are the six pillars of a good life and then having them in turn disseminate it to a client who then has to hopefully do something about it. So, you know, the, the combination of me working on my game, advisors getting serious about their game, and then the tech enablement process has been a good 1, 2, 3.
- [84:02]
B
So what else do you know? Now you wish you could go back and tell you like 15 years ago as you were starting down this path in the advisor world, you know, I.
- [84:14]
A
Wish, I think young Daniel tried to tell advisors what they needed and didn't do a good enough job of listening to advisors. That's something shout out to Eric Clark. That's something I really learned from Eric Clark was how to listen to advisors. Anytime when I would come to him with a new idea, Eric, Eric, I want to build this. He was always very gently because he's a gentle guy, but you know, always very gently, like, hey, have you asked advisors if they actually care about this, you know, in kinder terms? And often they did not. And I think younger me was oftentimes trying to tell advisors what they needed and get them to take their medicine and didn't do as good good of a job of listening to the voices of the people I was trying to help.
- [85:08]
B
So what advice would you give advisors who do want to start getting a little bit deeper on some of these, like behavioral finance principles to apply in their practices?
- [85:24]
A
I'm going to go back to my mirror and window analogy that I stole from Jason's wig. I think there is, I know there is a qualitative difference between an advisor who has been thoughtful about his or her values preferences approach and one who has not. They show up as infinitely more humble and more approachable. There's research to suggest that the two things that clients are most fearful of when they present to an advisor's office are judgment and jargon. And I think that advisors who have been through that process of self examination are much better about avoiding the two evil J's of judgment and jargon. So I think, you know, when I'll bring it back to the psychotherapeutic literature. When you look at, you know, when I, where I went to grad school, we were sort of known for what's called outcomes literature. And basically outcomes literature says when, when someone goes to psychotherapy, who gets better and who doesn't and why? And depending on who you ask, it's either the first or the second most predictive variable is the relationship between the client and the therapist. And I think there's every reason to believe that generalizes to the work of a financial advisor and her clients is to say, look, if everything you're asking them to do is hard, but if they care about you and you know that they care about them, it's going to work itself out, that's more powerful than a thousand little bag of tricks I could give you is if that relationship's there, a lot of the other stuff's going to fall into place. And one of the best things you can do for that relationship is to have done that work on yourself and have been thoughtful about who you are and how you show up.
- [87:27]
B
So, so as we wrap up, this is a podcast about success. And just one of the themes that comes up is literally that that word success means very different things to different people. And so you've had this incredible career journey around behavioral finance to now, now lead the whole shebang for Orion. And so it seems the, the, the career, your journey has been incredibly successful. How do you define success for yourself at this point?
- [87:57]
A
So I am a person of faith, and my faith teaches me that two things are enduring like two things, and only two things are eternal and you can take with you. And those things are relationships and knowledge. You know, it's my, it's my belief that, you know, relationships and love lives on and the things you learn live on to, to your betterment. And so in my more lucid moments, I mean, I'm as prone as the next person to getting caught up in a work fire or whatever small thing is making me angry that day. But, but in my more successful moments, true success to me is working on those two things, deepening my relationships with the two handfuls of people who really, really matter to me and trying to search out truth and trying to learn more about myself and the world around me. And that's when I'm happiness, when I'm working on truth and relationships.
- [89:05]
B
I love it. I really like that, that framework. Thank you. Thank you, Daniel, for joining us on the Financial Advisor Success podcast.
- [89:14]
A
Thank you so much.
- [89:15]
B
Absolutely. Thank you.
- [89:18]
A
Want even more ideas, tools and resources.
- [89:21]
B
On how to break through to the next level of success as a financial advisor?
- [89:26]
A
Check out the leading financial planning industry.
- [89:29]
B
Blog, Nerd's eye view at www.kitsis.com, where.
- [89:34]
A
Michael covers the latest practice management trends.
- [89:37]
B
And financial planning strategies. And by joining the members section, you can earn IMCA and CFP continuing education credits along with exclusive member content.
- [89:48]
A
Get it all now at www.kitsis.com.