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In financial services, KM is a plus

This article appears in the issue May/June 2018 [Volume 27, Issue 3]
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Knowledge management is crucial to the successful operation of any financial services business, whether to help customers with financial advice, to better protect sensitive customer and corporate information or to comply with financial rules and regulations.

Financial planners and wealth managers attempt to help their clients make the best choices for handling their financial assets. However, the best choices for one client may not be the best option for another client, even if their portfolios and family makeups (married, number of children, etc.) are nearly identical.

The reason is different clients want to do different things with their money and other financial assets. For example, one client might have as his or her top priority private college for children, while the second client might see less expensive in-state, public colleges as the better option and may be considering an earlier retirement than the first client. Additionally, the first client may be willing to take more financial risks to attempt to receive a better return, while the second client might sleep better at night with more conservative investments. To provide the best advice to clients, a financial adviser needs to know the client’s financial behaviors.

For a few decades, Tim Baker, president and CEO of Timonier, which provides financial planning, accounting and legal services for families with between $2 million and $12 million in assets, had used genograms to help understand the financial predispositions of his clients. By understanding a person’s family tree, one can get a good sense of who a person is and his or her attitudes toward money (risk-taker, conservative, etc.), Baker explains.

Using the genograms, Baker was able to better understand his clients, and they were better able to understand themselves, he says. But he wanted to see if he could do more. Running a Google search of human archetypes in April 2017, he came across DNA Behavior’s Financial DNA, which starts with a 10-minute, 46-question survey that drills down deep into the core of a person’s financial personality. Financial DNA is designed to identify a client’s unique financial personality and to discover their communication style, spending and goal-setting behaviors, risk profile and behavioral biases. For example, it shows how a client might react to market fluctuations, such as occurred in stocks in February 2018. It also helps determine if a potential client follows a budget, is a saver, etc.

“I saw that their behavioral assessment tools were far beyond the scope of what I had,” Baker says. “There is a wealth of information in there.” He took the assessment survey himself and found it to be extremely accurate. DNA Behavior claims an accuracy rate of 91 to 93 percent. Baker started using the tool in May 2017 and reports good results.

“We’ve had good feedback from the clients,” Baker says. “This helps drive discussions critical to providing the best advice to them.” Clients have been impressed when they see the Financial DNA reports. Baker explains, “It enhances our image to our clients.”

Even though he’s been using Financial DNA for nearly a year, Baker says, “I’m still a neophyte with this.” So, the next step will be to dig deeper into the questions and reports that the tool offers. “The depth of these things is so rich,” he adds.

In the future, Baker wants to use Financial DNA reports to help match the right colleagues with the right clients.

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