Welcome to Financial Advisor IQ

FAs Use Behavioral Finance Fintech on Clients

July 26, 2017

Behavioral finance tools now let financial advisors get a deeper grasp of their clients’ risk tolerance and biases and therefore serve them better, InvestmentNews writes.

The tools, which tap into ongoing behavioral finance research, can help advisors better craft financial plans as well as ensure clients stick to them, according to the publication. United Capital, for example, last year unveiled FinLife Partners, a tool for advisors that taps into clients’ views on money and spending and how they prioritize their decision-making, InvestmentNews writes.

The tool lets advisors find a balance between what the client needs and wants, Joe Duran, CEO of United Capital, tells the publication.

Last month Advisor Software released Behavioral IQ, which aims to get a clearer picture of six behavioral traits influencing clients’ approach to risk and decision-making though a series of questions and follow-ups, InvestmentNews writes. The tool, which essentially weighs biases by analyzing such factors as confidence and loss aversion, lets advisors make more appropriate recommendations, Mark Ferrari, chief research scientist at Advisor Software, tells the publication.

Lirio’s Finworx also applies insight into clients’ risk tolerance and decision-making approaches derived from questionnaires, according to InvestmentNews. The software then determines the type of content to send to a client, when to send reminders, and even how to use social media to exert further influence, the publication writes.

There’s still work to be done, however, Dan Egan, director of behavioral finance and investments at robo-advice pioneer Betterment, tells InvestmentNews. In particular, behavioral finance research should be applied to make better recommendations in estate planning, where understanding emotions is essential, he tells the publication.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.