What Research is Financial DNA based on?
How Was the Financial DNA Discovery Process Developed and What Key Research Formed the Base of Your Methodology and Allows You to Characterize it as “The World’s Most Reliable Process” to Reveal and Engage Clients?
- The concept of Financial DNA was conceived in September 1999 and was first developed by DNA Behavior International for commercial use in April 2001. DNA Behavior International has invested more than 60 years in the design of these systems and its programs.
- The Financial DNA Discovery Process was developed by Hugh Massie and his DNA Behavior team with the assistance of a team of behavioral experts and psychologists from Georgia Tech University.
- Our proprietary Financial DNA Discovery Process has been developed and independently validated since 2001 by a highly qualified team with over 100 years of combined academic and practical behavioral discovery instrument development experience.
- To ensure a reliable prediction of behavior, the Forced Choice Scoring Model is the basis for Financial DNA Natural Behavior Discovery which is the first step in discovering the complete financial personality. It solves the dangerous voids in traditional risk profiling. (See Q.21)
- Our view is that most of the traditional risk profiles use situational based questions, that is, the client could respond to the questions differently depending on any one (or a combination of) market or personal events, attitudes, feelings, perceptions or education. Our methodologies go deeper into a more instinctive, automatic, hard-wired “Level 1” decision-making behavior. Daniel Kahneman, the psychologist known for his extensive work in behavioral finance and decision making, details this "Level 1" automatic decision-making area in our brains as when we are under pressure, where our "hard-wired" instincts will drive decision-making. So unless a client’s “Level 1” behavioral style is known, it is impossible to build a long-term portfolio, as it will be emotionally incompatible. So the questionnaire has been designed to uncover this Level 1 behavior - free from personal or situational bias.
- The Financial DNA Discovery provides this Know Your Client (KYC) insight, and the validated results are accurate and constant over time.
- Risk tolerance is only one dimension of a client's financial personality. There are multiple elements of an investor’s overall “risk profile”. There are several other behavioral finance factors necessary to fully understand the decision-making biases of both the client and advisor. Not communicating these biases only creates more risk – to the client/advisor relationship, decision-making, goal-setting and overall compliance. The risk discussion is not complete without knowing the client’s full set of behavioral biases and knowing how to communicate on the client’s terms.