Top 5 Benefits of Behavioral Advice

1. Training your financial advisors to practice Behavioral Advice and deliver it to their clients is the biggest differentiator in the financial services industry today.

2. Helping your advisors manage their own emotions while helping their clients manage theirs during difficult market conditions will enable them to deliver superior client portfolio performance.

3. Behavioral Advice training not only supports client satisfaction and retention but also impacts advisor satisfaction, retention and performance.

4. Behavioral Advice will not replace financial planning. It will simply increase the effective usage of the financial plan by improving decision-making behavior.

5. Financial advisors who develop their Behavioral Advice competencies will ultimately improve their leadership of staff, associates, clients and themselves.

What is Behavioral Advice?

Behavioral Finance/Advice has existed for several years, working in conjunction with the field of traditional finance.

In brief, financial advice is based primarily on Nobel Prize-winning, modern portfolio theory. All learnings related to asset allocation, efficient frontier and model portfolios remain important. However, all are based on the premise that investors and consumers make rational decisions without bias and essentially will trade-off decisions based on risk and reward potential.

Behavioral Finance is the psychological angle on this topic. In theory, it's interesting to believe that everyone will behave rationally, but in reality, people frequently behave irrationally. Irrational behaviors are often stimulated by extreme emotions, either positive or negative.

The Lennick Aberman Group (LAG) helps us understand this reality. With a focus on Behavioral Advice, LAG helps financial advisors understand that people often behave in an irrational, biased-manner.

More specifically, LAG points out that people are more averse to loss that originally thought, and that loss tolerance is dynamic, not static. What this means is that more time should be spent focusing on loss tolerance than risk tolerance.

Research has proven that advisors who effectively manage their emotions deliver superior portfolio performance. This research has helped us understand that sometimes our very brain and our emotions work against us in terms of making great financial decisions.

LAG enhances the effectiveness of financial planning advice by more explicitly adding the concepts of Behavioral Advice. LAG trains, develops and improves the moral and emotional competencies necessary to deliver superior portfolio performance.