How To Use Behavioral Finance Techniques To Generate “Advisor Alpha” In Financial Planning Relationships

Saturday, April 12, 2014 12:39
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How To Use Behavioral Finance Techniques To Generate “Advisor Alpha” In Financial Planning Relationships

Scott Burns and Uri Pomerantz, who have designed an app to help financial advice professionals capture the three-percentage points of return annually squandered by consumers on common behavioral finance mistakes, spoke yesterday at an A4A continuing professional education webinar entitled, Applying Behavioral Finance Research To Mass-Affluent Financial Planning Engagements.

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Burns and Pomerantz, who met at as graduate students at Harvard, and have a track record for trying singlehandedly to make the world better, have built an app that tries to optimize advisor alpha, a concept Vanguard Group a year ago researched. They spoke about the underlying concepts of their financial planning app, Guide.
 
Their software uses behavioral finance techniques to maximize advisor alpha. It’s a pioneering effort that could influence advisor technology significantly by shifting focus of advisor apps to advisor alpha and behavioral finance.
 
Burns and Pomerantz agreed to speak about the underlying concepts behind their software and were faithful to that commitment. We’ll cover the software in another post. I asked them to focus on the behavioral finance ideas driving their software because it uniquely applies behavioral finance lessons to financial planning relationships. Behavioral finance techniques are often discussed with regard to mental mistakes in investing. But this growing body of knowledge has not been applied to making consumers more likely to succeed at achieving long-term financial planning goals.
 
If these the two young entrepreneurs are represent the future of the profession, our children are in good hands. Burns and Pomerantz both have demonstrated a deep commitment to making the world better.  
 
Burns, a CFA charterholder, served in the Peace Corps in Kazakhstan, where he grew an NGO to financial sustainability and taught economics at a regional university. Then, as an investment manager in Moscow, he deployed commitments from a $160 million private equity fund and served on the boards of several Eastern European logistics providers. More recently, he built an emerging-markets line of business in a major European energy consulting firm (part of a $2 billion annual revenue DNV group). He holds a graduate degree from the Harvard Kennedy School of Government in International Development.
 
Pomerantz, at 21, co-founded a non-partisan, non-political microfinance fund working with Israelis and Palestinians, and has since been involved in finance and technology work at major corporations (consulting at McKinsey and Company, investment banking at Goldman Sachs) as well as smaller, entrepreneurial organizations. He is an experienced programmer and worked as a Program Manager and Business Development Manager at Microsoft, and contributed to various strategy and technical roles at IBM and several Silicon Valley startups. as a B.S. from Stanford University in Symbolic Systems, a graduate degree from Harvard University in Economic Development, and an MBA from Stanford Business School.
 
Attendees gave the session a 4.2 star-rating. Below are comments from those attending:
·       Awesome. We need more programs that help us deal with behavioral issues and specifically how we can help move the needle. Hopefully, Guide financial will provide us with some practical tools to accomplish just that.
·       Nothing new for the advance planner. This was more suited for the beginner. Disappointed in this presentation.
·       Great webinar -- very engaging!
·       One of the best I've seen. And thank you for continuing to do these.
·       Thanks for asking them to record a tour of their software. It will be easier to see how they implement what they talked about.
·       Very respectful of their audience. Can't wait to see their demo.
·       Good.
·       Very helpful and interesting
·       Great presentation. I would have enjoyed hearing more about their business model for Guide and the cost to employ their software.
·       Time for questions during webinar.
·       Pretty good stuff. Interesting
·       Very interesting, I'd like to learn more about them
·       It was ok.
·       Interesting software product and discussion on behavioral finance. The first few charts were very informative, particularly the one about the difference in ending value of an account in which the participant increased his contribution from 3% to 8%. That was remarkable. It's ironic because the clients who complain the most about their returns, etc. are the ones who don't want to save the amount needed to reach their goals. I could see that issue percolating in these charts.
·       I wish that they had spent more time doing a demo of the software.
·       The webinar seemed to be about establishing the fact that people act in accordance with certain principles of behavioral finance. But I would hope that an audience of financial advisors would know that. I would have preferred more concrete suggestions of how to apply behavioral finance principles to client interactions/ client management, and would REALLY have liked more time on the software the presenters have developed. I don't care if the webinar is a "product pitch" if the product if effective.
·       Right out of Dan Ariely's Irrational Behavior class.
·       Not bad, yes they need to work at this. Not sure if they know what we do, manage client capital not babysit people who are trying to save. Nice objective but economically not viable. But, maybe their software could be used and, thus, I thought your suggestion on the software was good. Let's see!
·       Probably better suited for advisors with younger clients.
·       I would like to see the software and how it works.
·       Would have appreciated less chatter from Andrew and allowing more time for questions. Thx.
 
 
 
 
Awesome. We need more programs that help us deal with behavioral issues and specifically how we can help move the needle. Hopefully, Guide financial will provide us with some practical tools to accomplish just that.
Nothing new for the advance planner. This was more suited for the beginner. Disappointed in this presentation.
Great webinar -- very engaging!
One of the best I've seen. And thank you for continuing to do these.
Thanks for asking them to record a tour of their software. It will be easier to see how they implement what they talked about.
Very respectful of their audience. Can't wait to see their demo.
Good.
Very helpful and interesting
Great presentation. I would have enjoyed hearing more about their business model for Guide and the cost to employ their software.
Time for questions during webinar.
Pretty good stuff. Interesting
Very interesting, I'd like to learn more about them
It was ok.
Interesting software product and discussion on behavioral finance. The first few charts were very informative, particularly the one about the difference in ending value of an account in which the participant increased his contribution from 3% to 8%. That was remarkable. It's ironic because the clients who complain the most about their returns, etc. are the ones who don't want to save the amount needed to reach their goals. I could see that issue percolating in these charts.
I wish that they had spent more time doing a demo of the software.
The webinar seemed to be about establishing the fact that people act in accordance with certain principles of behavioral finance. But I would hope that an audience of financial advisors would know that. I would have preferred more concrete suggestions of how to apply behavioral finance principles to client interactions/ client management, and would REALLY have liked more time on the software the presenters have developed. I don't care if the webinar is a "product pitch" if the product if effective.
Right out of Dan Ariely's Irrational Behavior class.
Not bad, yes they need to work at this. Not sure if they know what we do, manage client capital not babysit people who are trying to save. Nice objective but economically not viable. But, maybe their software could be used and, thus, I thought your suggestion on the software was good. Let's see!
Probably better suited for advisors with younger clients.
I would like to see the software and how it works.
Would have appreciated less chatter from Andrew and allowing more time for questions. Thx

 

 

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