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Client Face-Reading Is Vital – With or Without Fancy Tech

By Thomas Coyle July 10, 2017

Artificial intelligence is coming into play more quickly than imagined. And though AI’s advent is bound to have a profound effect on financial advisors, one key functionality — so-called facial coding — can still be accomplished offline.

In May, the world’s best player of the ancient Chinese board game ’Go’ – said to be technically more complex than chess – lost to an AI. And this, experts say, occurred years earlier than it was expected to happen.

For wealth managers, AI technologies stand to make it easier to provide portfolio customization to down-market investors. For wealth management clients of all sizes and types, meanwhile, AI is on the way to streamlining portfolio accounting, rebalancing, goals monitoring and — maybe above all — information management in an age of information overload.

There’s even AI software in development that can help FAs interpret their clients’ facial expressions, Dan Hill of Sensory Logic, a Minneapolis-based consultancy, tells FA-IQ.

That’s something UBS apparently knows about. It declines to discuss it now, but last year the Swiss bank’s money management arm was testing “face-reading technology” to help it plug clients into investments and allocations best suited to their temperaments, according to reports like this one.

Hill thinks the underlying premise of such software — identifying universal facial “tells” — is a better indicator of someone’s state of mind than either old-school questionnaires or psychological tests such as “mind mapping.”

These gauges get at people’s “feelings rather than emotions,” says Hill, whose consultancy conducts market research based on facial coding. For psychologists, he explains, feelings are “cognitively filtered instances of self-reporting.”

But facial coding reveals emotions — and emotions are unfiltered data that show up on our mugs in predictable ways, according to Hill. And, he adds, these tells hold true no matter where the subject is from or how they were raised.

Universally, our eyebrows go up and our mouths fall open when we’re surprised. Our lips tighten when we’re scared. And when we’re feeling contemptuous, we can’t help pursing our lips in a vague snarl.

So, while facial-coding software promises to translate nuanced reactions and record fleeting emotional changes, FAs can be effective face detectives without technology, says Hill.

After all, there are only a few dozen really important facial tells, and most FAs could get a better read on client reactions to things like investment risk tolerance and setting particular financial goals by knowing five or six of them, Hill concludes.

Breanna Reish agrees. The owner of Wealth of Confidence in Riverside, Calif., embraces technology, especially around scheduling and workflows. Precisely where she thinks she’s better off on her own is in reading people’s emotions — and her views on the subject get to the heart of her reason for being a financial planner.

“Technology can make our businesses run efficiently but there are some pieces of technology that remove the human element in our business,” Reish tells FA-IQ. “The main reason I became a planner was to help people and part of that is empathy and understanding. How can I sleep at night outsourcing one of the most important pieces to a planning relationship?”

Breanna Reish

Besides that, she anticipates that using facial-coding software could be intrusive and awkward.

“I can imagine the conversation now,” says Reish, whose new RIA charges clients on their adjusted gross incomes. “'Mrs. Client, can you please look at my computer screen when you are talking to me? Because I am not able to interpret your facial expressions.'”

Jim Shagawat of Shagawat Financial Advisors in Paramus, N.J., finds facial coding especially useful in his practice, which focuses on “those who come into sudden wealth.”

These clients “have very similar anxieties and fears about money, having just come into it and not being used to the responsibility and needed protection,” says Shagawat. This led him to explore the subject of expression reading through the work of Paul Ekman, a psychologist who had a formative influence on Hill.

“I wanted to recognize more through their facial expressions the feelings and emotions my clients are experiencing to help improve my communication with them,” says Shagawat, who charges clients based on held-away assets under supervision.

Ekman’s pioneering views on facial coding coupled with face-to-face or at least videoconference exchanges with clients lets “you know how to adjust in real time to explain a subject differently based on the immediate feedback you get from their faces.”