What Accelerators and De-Railers are at Play in Your Finances?
Every financial decision we make is subject to financial behavioral variability. No two people make precisely the same decisions. A myriad of topics inform every area of decision-making.
We might not have the right amount of information. Maybe our advisor doesn't ask the right questions. Or perhaps we make decisions based on unknown inherent biases.
Thus, it’s necessary to cut through the “noise” surrounding the emotion associated with making each financial decision in order to fulfill life plans and goals.
Discerning Accelerators, De-Railers
So what's at the core of behavioral variability? First, it's the natural behavior of the individual. Second, it's the identity framework where talents, passions, values, beliefs, and individuality reside. And, thirdly, it’s also the current environment, prior experiences and other information flows that are playing their hand.
Very often, how you respond to these situations is highly predictable even if noise is creeping in. Without understanding this behavior and outside influences, decision-making will be inconsistent, vacillating or, other times, audacious or bold, putting financial and life decisions at risk.
To know your identity, you must first know your Accelerators; that is, your behavioral assets. Your strong points that power you on to success. And, conversely, your De-Railers; where your behavior tends to hold back or where you are vulnerable. The constraints that, if not known, can take you off track and frustrate plans.
You're not alone: We all have them, but success is found when you know you have them, you know how to manage them, what fires you up and what role each plays in your identity.
Don't mistakenly think that identity is about self-image, self-esteem or personality. Identity isn't a label; identity is the true essence of who you are. Your uniqueness. Your natural behavior. Ultimately, your being. It drives how you make decisions, what your life values and purposes are, and how you instinctively react and respond to situations. Not least of which would be the emotions that always surround money (even when you don’t realize it).
All these facets can be predictable: Knowing how to master and deal with unforeseen financial events, the emotion of money, the ability to withstand economic downturns, or even knowing when to seize an opportunity.
Measure, reveal & manage
Every person has behavioral Accelerator and De-Railer traits that form identity. Therefore, the most productive investor-advisor relationship happens when these are known. Hence the importance of having behavioral experts reveal the characteristics of both parties and, where necessary, match the client-advisor appropriately.
The role of the advisor should be about understanding the decision-making approach of clients. It should be about understanding client behavioral variability, how they make decisions, what informs their decisions, what rattles them and the emotional triggers surrounding money conversations that could take them off course.
As human beings, we all have certain diverse decision-making styles that are hard-wired into us early in life. These hard-wired behavioral variabilities can be predicted, as they are inherently part of our scientifically measurable DNA.
Variability in decision-making will usually reveal itself in times of higher market volatility when a person is under more pressure – or when a significant life event occurs. Hence the importance of getting a grip on the Accelerator and De-Railer traits of ourselves and our clients.
These behavioral identity traits are measurable; they can be revealed and managed. Once known, there is freedom and confidence in the financial decisions we make and the advice given.
How will you measure, reveal and manage these traits in your clients – and yourself?
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.