Turning Abstract Behavioral Finance Research Into Practical Tools To Better Client Outcomes: #FASuccess Ep 454 With Dr. Daniel Crosby

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Resources Featured In This Episode:

• Daniel Crosby: LinkedIn
• Orion
• Orion BeFi20
• Orion PulseCheck
• The Value of Advice: What Investors Think, What Advisors Think, and How Everyone Can Get on the Same Page
• Big Five Personality Traits: The 5-Factor Model of Personality
• The Soul of Wealth: 50 reflections on money and meaning by Daniel Crosby
• On the cusp of change: North American wealth management in 2030
• Meghaan Lurtz
• #FA Success Ep 381: Helping Clients Go Beyond The Plan To Actually Implement As A Fractional Financial Behavior Officer, With Ashley Quamme

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Full Transcript:

Michael: Welcome, Dr. Daniel Crosby, to the "Financial Advisor Success" podcast.

Daniel: Michael, good to be here. I've been looking forward to this.

Michael: I'm really excited to have you joining us today and to get to talk about, dare I say, nerd out a bit on behavioral finance, which... I find this is a topic, writ large, has just become more and more prominent in the industry over the past decade or so. I feel like in part spawned by all the technology evolution. First, it was the robos, now it's AI coming forward to threaten financial advisors and maybe at the least just automate more bits of investment management and maybe even some of the financial planning work we do for clients.

And then most of us as financial advisors will quickly retort, like, "Yeah, but technology's not going to talk my clients off the ledge when they're freaking out in a down market," which we connect back to behavioral finance for various reasons…clients make suboptimal financial decisions, and hopefully, we as financial advisors can improve upon that for them.

And at the same time, it's been fascinating to me because, at least my experience, clients themselves are often less receptive to this as a value proposition. Yes, they may make their so-called irrational decisions, but that doesn't mean it's helpful to throw in their face and say, "Mr. Client, you're being very irrational right now." Or, "Yeah, you should pay me 1% a year because someday you're going to make a really stupid decision. I'm going to save you from it." It may be totally true but seems a little bit difficult to get clients on board with that prospectively. Even as advisors, we have all seen firsthand how much clients need the help when those moments come.

So, I know you as someone that has spent essentially your career on all things behavioral finance, pretty much all applied into the financial advisor domain of what we do with clients. So, I'm excited today to get to dive deep into this. What does it really mean to help clients with behavioral finance? And maybe how do we help clients get more buy-in to it? Or maybe that's not even a good objective. We just have to help them with it. Who cares if they wanted it? They'll appreciate it when they get it.

Daniel: Yeah. Well, you've done incredible work in this space too, and I'm confident we're going to have a lot of fun nerding out.

Michael: So, as we dive in... I think, just for starters, it would be helpful to give folks who are listening some context into just who is Dr. Daniel Crosby? What do you do? Where do you work? What is your firm? Just help us get some context of where you are and what you do now. And then we'll talk a little bit about that journey over time and just the behavioral finance things that you get to do in your work.

Daniel: Yeah, happy to. So, I think it's important to start at the beginning. So, I am a clinical psychologist by education. I went to school ostensibly to help people with eating disorders. That was really the thing that initially drew me to the world of psychology. And so, I entered my freshman year of college thinking I was going to be a financial advisor like my dad.

And after my freshman year of college, I went on a two-year mission for my church, and I spent two years in the Philippines and in Manila. And when you're a kid from Alabama who finds himself in Southeast Asia for a couple of years, you learn a lot about life and culture and the way that different people live. And so, I came back from that two-year experience just absolutely fascinated with human behavior. And so, then I set out on this course to study psychology.

When I reenrolled in college, I said, "Look, I'm going to study psychology." And I loved that. And about this time, someone important in my life had an eating disorder. And I became a liaison between her and the doctors that were helping her and her family back home. And so, the combination of this friend who was hurting and the mission experience just made me fall in love with the study of human behavior. Well, we can talk a lot more about this, but the short story is I burned out rather dramatically. I was 23 years old when I started doing psychotherapy, which I think we can all agree, Michael, that 23-year-olds have a lot to teach the world about how to live a good life, wouldn't you say?

Michael: Oh, yes, yes. You're 20-odd years in. You basically mastered it. So, so much to teach the world. Absolutely.

Daniel: Yeah, I had basically nailed it at 23. No, so from 23 till I finished my Ph.D. at 27, I was doing therapy, and I just burned out. And so, that is rather circuitously what led me to say, "Hey, I love studying human behavior. I know that I want this to be part of my career, but I don't think I can do it in a medical context."

And so, these days I work at Orion Advisor Solutions. I'm the chief behavioral officer there. And to Orion's great credit, they saw the power of integrating behavioral finance, especially in the technology, into the way that we educate advisors. They see the importance of this, and they've given me this really cool role that there's not a whole lot of in the industry. And so, that's my day job. I work at Orion and build training, and technology, and tools for advisors.

Michael: So, can you talk about that a little bit further? Really, what do you do as chief behavioral officer? What does that mean? What projects or things are you actually doing day to day, week to week, month to month in the organization?

Daniel: Yeah, it's a great question, and it's a question that many people have, including my mom. My mom asks me with some regularity, "What do you do, again?" So, there's really about three parts to my work, and I call it training, tools, and technology. But a big piece of my work is being an external representative for Orion at conferences, to the media, and to other places. Do a lot of conference speaking. I'm frequently running into you, sir, at one conference or another. We're both very busy that way. So, I do a lot to talk about the firm and represent the firm externally. That's maybe the biggest part of my job.

Internally, I do a few things. We have a whole suite of behavioral finance-enabled tech tools that are baked into our planning process, and that has been really, really fun. For most of my career, I've been at this for about 13 years in finance, and for most of that time, most of what I did was speak at conferences, write books, write papers, do research. And that's good, and that'll always be part of what I do, but there's a certain lack of scale to that. And we could certainly talk about the knowing-doing gap and how little of what people hear at a conference or read in a book actually gets implemented.

So, technology being as ubiquitous as it is, and the fact that technology just operates beneath our awareness and runs in the background means that if you can bake some behavioral insights into a technology, sometimes that adoption gets a lot easier and clients get the benefit of that behavioral insight without it being delivered in some obvious ham-handed way, like you talked about earlier, where people aren't really open to that. So, technology enables, I think, the delivery of behavioral insights in a really cool way. So, Orion has been a wonderful playground for me in that respect.

And then this is probably the smallest part of what I do, especially with my colleague, Dr. Naomi Win, we're starting to get into doing some research, creating content, writing papers, and we're in the very early stages of doing that original research.

The Differences In How Advisors And Clients See The Value Of Behavioral Finance [11:21]

Michael: Okay. So, I'm interested to hear more when you talk about this phenomenon of we're trying to bake elements of finance behavioral insights into tech. Can you give me examples of things you all have been doing or building? How does that actually show up in practice?

Daniel: Yeah, I'm happy to talk about that. I think I'll start with the very good point that you made earlier, that's been supported by a lot of research, that Morningstar, in particular, has done a really nice job with. They have an excellent behavioral team as well.

But this Morningstar research, when they survey end investors on what parts of an advisor's value stack they value, what parts of what the advisor is bringing to their life do they value the most, the things that are obviously emotional or behavioral in nature, are consistently at the bottom of what clients report valuing. Survey responses like, "My advisor helps me not make irrational decisions," or, "My advisor helps rein in my strong emotions," are consistently near the very bottom of that stack. And the reason is just what you stated from the outset, no one likes to think of themselves as being silly or hotheaded or emotional or in deep need of some reining in.

Michael: I really do find that an interesting phenomenon that we...we've all collectively agreed as advisors, right, the hand-holding and the talk-you-off-a-ledge stuff really matters because if you've been in the business any period of time and have gone through at least one nasty market volatility, bear market cycle, you've had at least one or two of those scenarios, you can literally see firsthand the impact you have had on a client to help them not exit a market at the bottom.

And when markets are not volatile and times are not difficult, it is ridiculously challenging to convince clients that this is a valuable, useful thing because you basically have to convince them that they cannot actually control their own emotions and decisions in some distant future moment. And most people just don't seem to really want to admit that about themselves. Even if it's true, it takes a lot to convince someone that they can't handle themselves. And at some point, it's easier to be in denial that you can't handle yourself than to say, "Yeah, I'm really a total hot mess. I should just give you all my money."

And so, I feel like we get to this point where when we try to convince clients on the behavioral finance merits alone, even though we all know it works in the moment, when we're not in one of those moments, we're basically fighting against clients' denial, willingness to admit that they might actually have a problem with this.

Daniel: Yeah. So, you're exactly right. And so, well-meaning advisors who have read the research, and I mean the research is very consistent, that if you have a long-term relationship with someone and you keep them from making three to five really sell-at-the-wrong-time-type emotional decisions over the course of your professional relationship together, that will most likely be the most value you ever add to their lives from a dollars-and-cents perspective. And yet the simultaneous truth is that no one wants to hear that because it requires them to make some admissions about their own fallibility and their own brokenness that are really hard for us to make.

And so, I think advisors who pound the table on this or are overly emphatic or overly transparent about that being their biggest value-add, they're asking the client to accept something that is nearly impossible to accept. But if you look at that same Morningstar data and you look at the top of the list, it'll say things like the things that they value the most are clear communications and "Helping me think through and articulate my goals and helping me reach my financial goals."

Well, what I want to say is that that's all behavioral too. The articulation of a goal requires a whole lot of behavioral finesse. Increasing the salience and the vividness around that goal, that's a behavioral consideration as well. So, we've had this really one-dimensional view as an industry of behavioral finance as being "People are stupid, people are broken and irrational. We're the last..."

Michael: We'll save them.

Daniel: Correct.

Michael: It feels good when you're going to be the savior. Yeah, I want to be the one that saves them. They'll be forever grateful. It's wonderful.

Daniel: Correct. Yeah. So, it's this huge thing, and it sets up a massive...it exacerbates the existing power differential. It sets us up as saviors. The clients can't hear it. There's all sorts of problems with this. So, that's why I think technology is so powerful. It's just there. And you can have behavioral sophistication within that technology in a way that isn't like, "You're sick, open up and take this medicine."

Incorporating Behavioral Finance Concepts Into AdvisorTech Solutions [16:59]

Michael: So, then take that one step further with us. So, how does this get baked into technology then? What are you doing in technology that makes this show up different or better than the versions that we've been just talking about here?

Daniel: Yeah. So, I think there's subtle and less subtle manifestations of this. On the subtle piece, things as small as the colors used in the technology, the wording of a question, the phraseology on a risk tolerance questionnaire or a get-to-know-you questionnaire, the sequence in which different parts of the tech are presented to the clients, all of these things have a dramatic material impact on how that client responds and their experience. So, things as small as the things I've just mentioned are really, really large, in fact. And I think technology providers are wise to consult with people who are knowledgeable around these things.

The more obvious, more explicitly behavioral stuff, some of the stuff we've built, there's a handful. So, I'll talk about a couple of those. One is a personality assessment, for lack of a better word, a personality assessment for your financial values. I did research a few years ago where I talked to over 400 couples about, "What do you fight about when you fight about money?" I worded it a little more elegantly than that, but that was effectively what I was interviewing these folks about.

And we entered into this conversation with one set of assumptions and one goal, which was that marital money spats are, depending on who you ask, either the biggest or one of the biggest predictors of divorce and separation of just about anything out there. And so, we thought, "Well, we as an industry are in a position to keep the love alive and keep families together by helping people better communicate about money." And that is still the case.

But what we found was there were five continua, there were five dimensions where people were consistently running into conflict. And what we found is the conflict existed because these were deeply held values. People were fighting about this because they felt strongly about it.

And often they had come to these assumptions or these beliefs about money uncritically in an unexamined way that they had inherited from their culture or from their family of origin. And whatever you grow up like, that's your normal, that's your homeostasis until you move in with someone or you get married, and then your money world is brought into sharp relief with the financial attitudes of another person. And yikes, what do you know? There's conflict.

Another thing we found across these five dimensions is that even when there's not conflict, there can be groupthink. Of the five dimensions, the one where we found the most conflict was whether money was best used to enjoy today or to secure tomorrow. So, people are strongly decamped typically into one of these sides or another, like, "Hey, money is for YOLO. Money is for living today. It's a beautiful day. Tomorrow is not promised. Let's get it." Or, "We've got to sock this away. We've got to save it."

And what we found is, first of all, that the two camps are very judgmental of each other. And second of all, if you look at a couple, I'll use my wife and I as an example. My wife and I are both soundly in the save for tomorrow camp. So, I'm the son of a financial advisor. My wife's the daughter of an accountant. And we both...

Michael: Fantastic.

Daniel: Yeah. We're both squarely in that camp. So, what that means is we don't fight, but we have unexamined problems, right? If left to our own devices, we would save and save and save and ignore opportunities for seizing the moment and living that beautiful day. So, I think the truth is found in moderation. So, we found these five dimensions. We found that you're either prone to groupthink or disagreement. And we were able to create a less than three-minute assessment that will give individuals and couples a sense of their financial values. And then we can actually plug this into AI and you infuse it into our reporting. So, you have a deep understanding of someone's financial personality, now you can create custom reporting that speaks specifically to who they are, how they communicate, and what matters to them.

Five Dimensions Of Money Conflict [22:23]

Michael: So what are the five dimensions that you were building around here?

Daniel: Yeah, let's get it. So, the first one is communications. So, we found that people fall broadly into two camps, direct and indirect. Certain people really are very comfortable talking about money, and others grow up with this idea that it's impolite, that it's gauche, that it's tacky. And again, in all five of these, people have strong feelings about the people in the other camp. And in both cases, I think a lot of times, advisors will hear something like this and go, "Oh, well, I want to work with the people who are direct communicators."

But we actually found strengths and weaknesses with all five of these styles. So, for instance, the direct communicators can often confuse talking about it with being about it. It's like, "Oh, well, we talked about it and think that that is enough to get it done," or "That talking about it is tantamount to getting it accomplished." And we found that sometimes the talk is just talk.

And then, of course, there's, I think, obvious problems with not talking about it. You get wrongheaded assumptions. Things get swept under the rug. But communication was that first level. The second level was worry. Some people are deeply concerned and think daily about their finances, and other people really don't. And it is largely independent of wealth. Some people are just wired to worry more than others. And some people, even people of means, just worry a lot.

Michael: That's like a version of Big Five neuroticism, that same anchor point, just like some people just naturally get more worried and anxious about the stuff that's going on, and others don't.

Daniel: This is why I love you, Michael. Yes, it is just like Big Five neuroticism. It's a ton like Big Five neuroticism. Very... And if folks don't know the Big Five personality measures, please go check it out, because it's the best thing going in terms of measuring personality. But, yes, it's a lot like neuroticism. It absolutely is.

And so, again, we think, "Oh, well, I want to work with the people who are low on worry. They seem chill and fun." But the people who are low on worry tend to have inadequate insurance. They tend to have inadequate savings, things like that. So, there's this horseshoe element to it that any strength overextended becomes a weakness.

The third dimension was that time, the time dimension I cited earlier. Is it better to enjoy today or to secure tomorrow? And, of course, I think the real richness is found somewhere in between those things. The fourth one was the only one where we had a gender-based and culture-based dimension. Most of the others are fairly evenly distributed.

The fourth dimension is money viewed as an individualistic or a collectivistic good? So, in the one camp, we've got folks who say, "This is my money, I earned it. It's for my use." Put your own air mask on first if the plane is going down, and they emphasize hard work and responsibility. That's all good stuff. There's an element of reason to that.

In the other group, we find that people think that this is a collective good, right? If grandma needs her light bill paid, that's on me. I got to help with that. If my sister is going to college, and she's short on rent, I should contribute to that. And this one gets really thorny. This is a point of real disagreement for a lot of folks.

Michael: And you said this skews gender and culturally. Can you talk a little bit more about where the skews are?

Daniel: Do you have a guess anecdotally? I'm happy to talk about it. I'm just curious if you have a guess anecdotally.

Michael: In part, because I'm looking around at our financial advisor industry itself. And I feel like there is a more male gender tilt towards individualism, and that women tilt a little bit more towards collectivism.

Daniel: Yeah, that's what we found. So, non-white, non-Western women tended to be more collectivistic in their thinking, and white Western men tended to be more individualistic in their thinking. And again, both taken to extremes can be problematic because, at the one extreme of individualism, you're really missing out on some opportunities to help others and to bless your own life. I've just wrote a whole book on the positive benefits of gratitude and philanthropy and charity, and being generous. It's one of the few ways that we can reliably buy ourselves happiness with our money is by lifting other people. And you're missing out on that if you're too individualistic.

But on the flip side, if you're too collectivistic, if you take that to its logical extreme, then you're penniless and you don't take care of yourself. And you're not even meeting your own needs, and you can't fill others' glasses when your own pitcher is empty, sort of thing. So, finding that nuance is really critical, finding that middle ground.

Michael: Well, and I'm struck by it again when, practically speaking, we are living in an industry where three-quarters of the advisors are men, almost all of whom are white men. Just if individualism disproportionately maps on to the prototypical financial advisor, to me, it implicitly means we are more likely to have challenges and issues with any of our clients who do not share that belief. Which, frankly, I can think of instances with clients over the years because... I'll admit I certainly fall into that individualism camp, just to put your own air mask on first before you help others is very resonant to me.

Daniel: Yeah, for me as well. And you make a great point there. Jason Zweig has this great bit. I hope I quote him correctly here. But he has this great piece on the best use of behavioral finance is not as a window onto other people's behavior, but as first and foremost, a mirror onto our own behavior. My fear when people read one of my books is that they're going to get caught up in the quirkiness of human nature and use it as a gotcha for the clients they serve or to point out the irrationality in their spouse or their kids, or their clients or whatever.

I think the highest and best and primary use of behavioral finance before we can take that second step is to look at ourselves and go, "Okay, well, me, Daniel Crosby, I'm a middle-aged white man from the Deep South, although that comes with a very particular set of assumptions. And I lived in the Philippines for a couple of years. And if you were a financial advisor to a first-generation Filipino couple and you were telling them that they couldn't send money back home, or they...

Michael: Yeah. Or your kids can borrow for college, but you can't borrow for retirement. You have to save for your retirement before you help your kids through college.

Daniel: Yeah.

Michael: Right. That one comes up a lot.

Daniel: Or that grandma needs to go to an old folks' home. None of this would land, and they would think you were monstrous. And we have to know the place from which we're giving advice.

Michael: So what's the fifth dimension then?

Daniel: The fifth dimension is importance. So, we found that for about half of people, their wealth is a material means by which they keep score…when they ask themselves the question, how am I doing? Am I living a good life? Which we all ask. And this is a very fundamental existential question. And about half of people answer that, at least in large part, by looking at their bank account. And then about half of people think it's completely orthogonal to anything to do with what kind of a person you are.

And it's interesting because, Michael, probably the number one question I get these days after many years of a good market is around decumulation. "I can't get my clients to spend their money, and why won't they fly first class? They have all this money, and why won't they live a little?" And for a really large subset of the population, their net worth and their self-worth are inextricably tied together.

Michael: Right. I can't start spending it down because I need it to go up, because I need my score to go up.

Daniel: Yes. I'm the $5 million guy, and if I have $4.8 million, then I'm no longer the $5 million guy.

Michael: You're no longer the $5 million guy, yeah.

Navigating Money Personality Differences And Similarities In Client Couples [32:41]

Michael: What fascinates me around these and the way that you frame them, communication, worry, time, the individualism-collectivism divide, importance. You'd said it earlier, just it's resonating to me now. These are not only spectrums of a financial behavior or money belief, right? I talk more directly or less directly. I worry or I don't. I'm more spend today, I'm more save for tomorrow. It's that most people tend to gravitate to one extreme or the other. It's harder to find people in the middle, at least I feel like, anecdotally.

And perhaps most notably, the people at one extreme tend to demonize the people at the other end of the extreme. Whatever dimension it is, if you're a hardcore saver, you shake your head at the spenders, and if you're a hardcore spender enjoying today, you shake your head at the savers who can't enjoy their own money. And I think likewise across all of these that they're not just a range of behavior. They're a range of behavior where we actually have some very strong, often negative feelings about people on the other end.

Daniel: Thank you. Thank you for the window to talk about that. If we take the time dimension as a point of real friction for a lot of folks, people in the spend today camp, enjoy the moment camp. They look at people in the save for tomorrow camp, and they go, "These people are lame. These people are no fun. They're a stick in the mud. They're a wet blanket. They're a fun hater," whatever.

On the flip side, people in the save for tomorrow camp look at the spend for today camp people and go, "Wow, they are unserious. They're frivolous. They can't be trusted. They're wasteful." And we look at this with so much judgment instead of saying, "Hey, this is part of the truth. There's probably something I could learn from this. There's probably something you could learn from me. Let's meet in the middle."

And again, when you think about this in the context of a romantic relationship, or even, let's say, a grandparent leaving money to a grandchild. We use this assessment a lot of times when there is money in motion to say, "Hey, why don't you get clear on your expectations and your priorities, and your preferences?" Because, yeah, when grandma gives you this money and then you spend it on a year walkabout so you can...on a gap year, to go find yourself and your grandpa and your grandma go, "What the hell? This isn't what that was for." There's things we can learn from each other, but we are so rooted in our homeostatic set point in the way that we grew up that we cannot see the other side.

And a lot...Carl Jung has this great quote, I'll paraphrase, "Until you make the unconscious conscious, it will direct your life, and you will call it fate." And that's what I feel is the biggest gift we give to people when we make them aware of these preferences. It's like these things have been operating in the background of their lives, unspoken, unhighlighted, unarticulated, and they're just driving their behaviors in ways that are unchosen because they're unknown to them.

And so when you bring it to their awareness, when an advisor brings this to their awareness, then you can do something about it, and you can work with your spouse to meet in the middle or at least understand where they're coming from. And it's not a place of being a fun hater or a spendthrift, but it's likely just how they grew up.

Michael: And so you ultimately build an assessment tool for advisors put clients through to measure themselves on the five dimensions and understands how they're showing up.

Daniel: That's right. It's a 20-question assessment, takes just under 3 minutes on average. And you can take it individually, and we'll give you the rundown on who you are, or you can take it with a loved one, and we can plot your spot on each of these five dimensions relative to your loved one.

And then what we do is in cases where there's a high degree of similarity, like there is with myself and my wife, we go, "Hey, Daniel and Katrina, you two are both in the save for tomorrow camp. What you may want to do is consider opportunities to live in the moment, because if not, you're going to wake up with a pile of money and not a whole lot of memories…it's a little more elegant than that. But then if you're in the divergent camp, like if you and your loved one find yourselves in different camps, the language is all about understanding, bridging the divide, and avoiding conflict.

So what's interesting, if you look at the psychological literature writ large, we find that psychologically diverse teams. There's a lot of talk about gender diversity and ethnic and religious diversity, but if you look at a psychologically diverse workplace, a psychologically diverse workplace tends to have more fights and take longer to make decisions. But if they can overcome that tendency to squabble, they actually make better decisions. They make more money and their businesses do better, but you have to learn to overcome that disagreement.

Michael: Yep. It's one of the comments I actually make a lot internally with our team, even on the Kitces platform. We spend a lot of time thinking about how to have a diverse workplace of views and thoughts, and ideas in particular. We're building a lot of novel new programs, we're trying to create original content. Just it takes a lot of perspectives to vet and test a new idea.

And one of the things that I had long observed, it's like, wow, yeah, when you get people with really diverse perspectives in the room, they fight a lot more, and stuff slows down because they've got to fight and hash it through. Things get done really fast when you groupthink. You're like, "Hey, what do you think of this?" Everyone's like, "Yeah, it looks good."

Great. You get stuff done really quickly, and then you don't really particularly test your ideas, and you get blindsided. More diverse perspectives, we have certainly found, put ideas through the crucible and get to better outcomes. And I feel like the part that at least no one previously had reflected to me until we started building this, is, oh, yeah, and decision-making is messier and stuff happens slower and there's a non-trivial amount of tension sometimes that you have to navigate through because as you know, people come with some pretty strongly held beliefs sometimes. So, if someone else in the group is going to really challenge them, that can create some friction in the group or amongst the team that you have to be prepared for or navigate through.

Daniel: Yeah, it's whereas a group that's psychologically homogeneous will joyfully lock hands and walk right off a cliff, right, the outcome is not as good, but the process is a lot cleaner. Michael, my first job out of grad school, I did this for two years, was actually pre-employment assessment of financial executives and healthcare executives. So, I would give them IQ tests and personality tests and tell the organization whether or not I thought they were a fit to hire this person. And my observation, now I'm rounding here, this is imprecise, but I feel like you want someone who shares, call it 70%, 75% of a cultural fit.

If you hire people who are clones or automatons, you're not getting that diversity of thought. But if you hire people who are such mavericks that they're totally on the other side of everything and they can't even see your perspective, that's chaotic and disruptive too. So, I think you want to...it's an imprecise process, but you want to look for people who have a good degree of overlap, but not perfect overlap, to keep the organization running and growing.

Michael: So, for advisors who are hearing this and actually want to try it with clients or perhaps themselves and their significant other as a test case, just where is this found? How do people access it? Is this a standalone thing from Orion? Is this available separately? Is this built in? Where can someone try this if they actually want to try it out?

Daniel: Yeah, it lives in...the name of the tool is the BeFi20, Behavioral Finance 20 questions. And it lives inside of Orion Planning. Yeah. So, those who have Orion Planning have access to it. And that's where you would try it out, though.

Financial Advisors' Place On The Five Dimensions [42:05]

Michael: Speaking of organizations, groups that may be fairly homogeneous on these, when I look down these, I'm pretty sure I can peg the average financial advisor on all five of these.

Daniel: Oh, yeah. And who they want to work with.

Michael: Yeah, we are direct communicators. We are low worriers, because we have to be the anchor, rock for our clients. We actually found that...we did a separate study a couple of years ago around big five personality traits as they map on a financial advisors and found advisors are actually not tilted in any particular way towards being extroverted, even though that's the stereotype.

The thing we are multiple standard deviations off the norm is we are extremely low neuroticism, which basically means we're really emotionally stable compared to the average person out there, which I'm like, "Well, yeah, when you have to sit across some clients who are venting all of their frustrations on a regular basis, got to be fairly emotionally anchored," or it just gets hard to work with clients because their emotional volatility becomes your emotional volatility and constraining. So, I'm just going down these advisors or direct communication, low worry, we're clearly save for tomorrow tilted. I think at least as a group, we are individualistic-tilted and we're probably somewhat money, wealth importance.

Daniel: High importance, yeah, for sure.

Michael: Tilted.

Daniel: Nailed it.

Michael: Right, it's why AUM is a dominant metric in our industry. Just it is what it is. So, it fascinates me that, okay, and then I pulled this out, I'm like advisors probably very disproportionately, not even just have a loading on some of these, but have a very specific sequence of five that we likely score on, which would create, well, conflict with almost anyone who doesn't align with them well. If my clients won't talk about the money things with me, it's hard to do financial planning. High-worry clients are very stressful because they're constantly calling us and getting worried.

People who spend everything today and don't save for tomorrow don't make great clients. Lots of conflicts around individualism versus collectivism, right? I'm just thinking of literal things that I know get said around our industry rates, things like "Your kids can borrow for college, but you can't borrow for retirement." So, you need to save for your retirement first and then help the kids through school, right, which is a very individual versus collective divide.

I feel like the only one where maybe it's not contentious is the importance dimension. I suspect we skew towards wealth importance, but I don't know that we necessarily implant that on clients or have troubles working with clients who don't load on that dimension. But we're strong on four, and it's hard to work with clients who are not the same as us on all four.

Daniel: Yeah, it's an excellent breakdown of where I think the industry sits. And even if you go back to your research on where advisors sit on the Big Five, all else equal, I would take low neuroticism over high neuroticism, just as a nice way to live a life and to work with clients. But even something like that is not value-free because people with low neuroticism can sometimes be low empathy or come off as aloof or indifferent because if you're never worried and someone else is more neurotic than you are and then comes to your office and is really, really upset about tariffs or whatever the tragedy du jour is, and you feel distant or unconcerned or can't connect with that feeling they're having, that's a problem.

So, even knowing that, like, "Hey, I'm low in neuroticism," that's mostly good because I'm not giving my clients stress contagion, I sleep well at night. There's a lot of really wonderful things that come along with that. But hey, I need to know this about myself because I need to be on guard against looking as someone who lacks empathy when someone who is truly worried walks through my door. So, I think it's critical that we know these things about ourselves and where we sit along these continua.

Incorporating Positive Psychology Into The Client Goal-Setting Process [46:37]

Michael: So, now take us forward to, I guess, these other areas where you have been, I think, as you put it, baking behavioral finance into technology. Just the BeFi20 here has been a fascinating example. So, where else has this shown up for you guys as you're building

Daniel: To give another example of a specific tool we've built, we've built this tool, I think, increasingly, if I can just back up a little bit. We talked at the outset about this one-dimensional view of behavioral finance and how the long and short of behavioral finance was keeping people from making stupid decisions. The growth and the popularization of behavioral finance has, in large respect, mirrored the growth and the popularization of psychology broadly. So, psychology is only a couple of hundred years old as a discipline.

It started out with the study of brokenness and the study of deficit. What psychologists started studying first is how your parents screwed you up, what makes you sad, what makes you depressed, what makes you anxious. And it was only in the early to mid-'90s that we got this field of positive psychology.

And positive psychology, especially the work of Martin Seligman and others, is this idea that, hey, we need a science that studies what makes someone a great parent, what makes someone a great leader, what leads to human flourishing. And behavioral finance, I think, has been on that same trajectory. We started out with this need to break from traditional econometric models. And the way you do that is by cataloging all of these deviations from rationality.

Well, that's cool. And there's some benefit, like it's the funny stories, and there's benefit to that because we need to manage those behavioral risks. But we also need a science of how can money be spent, saved, and invested in ways that lead to human flourishing?

So, with that as a backdrop, our newest behavioral finance tool is something called PulseCheck. And what we do is we take the six dimensions of flourishing, informed greatly by the work of Seligman and others, and we present them to clients and we say...and we can talk about them in a second, but we say, "Look, here's the six things that lead to effectively a good life." They're not all going to matter to you equally at any given moment in time. So, we use that technology to say, "Hey, here's the six things you need to live a happy life. Rank them in the order they're important to you."

So, then the folks do this, rank them 1 to 6 in order of their personal importance at this moment in time. And then we say, "Okay, now drag this 1 to 10. How are you doing on this dimension?" So, we can talk about all six, but if one of the dimensions is relationships, for me, that would be my number one right now. I got a wife who I love and young kids at home. So, relationships are number one for me. And so, I'd say relationships are number one. And then it says, "Okay, drag it 1 to 10. How are you doing on relationships?" And I go, "I'm 7. I travel too much, too many conferences."

And so, then what it does is we do a little wizardry in the background. We calculate the biggest delta between importance and how it's playing out. And then we prompt them to set a financial goal to improve on that. So, if my relationships are a 7 out of 10 and I want to move them to an 8 or a 9, I could say, "You know what? I want to take my kids to Japan. I want to take my family to Japan because that's been on the list, and that's going to cost, I don't know, whatever, $20,000."

So, in order to move the needle on this, sometimes there's a financial goal associated with that. Sometimes there's not, candidly, but it's baked into our planning process. So, they can score themselves on how they're doing in terms of living a well-rounded life of flourishing, and that's also integrated into a planning process. So, if there is a financial dimension to that, they can set a goal around it, and the advisor can check up on that. And that's what's so cool to me.

You know, McKinsey talks about in their wealth management 2030 white paper, they're like, "The future of advice is going to be effectively life coaching." I hate that term, but that's the term they use. I don't have a better one. And so, they say, "Look, as AI continues to commoditize many of the more technical aspects of our job, we're going to become bigger and bigger life coaches and decisional guides for our clients."

And so what we're doing inside of our planning tool is measuring not only their financial wellness, but their personal wellness and bridging the gap between those worlds to helping them set financial goals that raise personal boats.

Michael: So, what are the six dimensions, six things that you're measuring here?

Daniel: Yeah, so the first one is, call it fun and leisure, doing fun stuff, taking a break, vacation, eating an ice cream cone, going to a movie, the stuff that money can buy. Money is excellent at fun and leisure. The second dimension is engagement. So, this is deep, meaningful work, immersive work, not busy work, but the work that causes you to lose track of time. People don't typically think about work as being one of the pillars of a happy life because we like to roast work and talk about all the ways that it sucks, but work is an important ingredient in a life of flourishing.

The third one is relationships. This is the one that the science tells us is the most predictive is, are you giving and receiving love? The fourth one is meaning. So, meaning is working for a cause or a purpose that's bigger than yourself and your wealth. This could be your religion, spirituality, philanthropy, teamwork, but just anything that gets you out of yourself and puts you in another focused way.

The next one, the fifth one, is personal growth. So, we are wired for achievement, we're wired for growth. We want to be better today than we were yesterday. So, are you growing? Are you learning? And then the last one is your physical health and strength. So, are you in shape? Is your weight under control? Are you exercising? Are you getting outside? That sort of thing. So, those are the six. Fun, work, relationships, meaning, personal growth, and health.

Michael: So, I guess quick question on this, just the work dimension ties into doing deep and meaningful work. And then you separately talked about meaning, like working for a cause or purpose that's bigger than yourself and your wealth. So, I guess just can you help distinguish those a little bit further for me, the separation between work that is meaningful and meaning where I'm working towards a cause or purpose?

Daniel: Yeah, so the engagement piece or the work piece would be around either your day job if you're still working or a deeply immersive avocation if you're retired. So, it really could be... I play guitar. It really could be something like I'm working at trying to get better at guitar, or I'm working at woodworking, or something like that. And of course, there is some bleed there, right? Because there's an element of personal growth in there as well.

But yeah, work is really more about how fulfilling is either your 9:00 to 5:00 or the way that you're spending your days if you're retired. Meaning would be more things like if you believe, if you're a person of faith, how's your relationship with God? If you're spiritual, are you reading books and getting out in nature and doing the things that meet those spiritual needs? This would be things like volunteerism and philanthropy. It's stuff that is higher power or higher purpose.

Michael: Okay. And so, the assessment is ranking these and then reflecting back, ranking these, giving people their score, how well are you doing on the things that you ranked? And then it starts to spot gaps, opportunities to do things, and change things in your life to help advance these. So, like per the name PulseCheck, how often do you envision a questionnaire like this gets administered? Well, how often do you take this to do a pulse check?

Daniel: Yeah, I think there would be a high level of discretion here with the advisors, and life changes. For me, you could do this as much as every year, but for someone in my situation, where my job is pretty stable, my family life is what it is, you could do this as much as every year, but probably wouldn't need to. But I think this would be especially helpful for people who are going through a change or considering a change. So, I think it could be life event-driven.

And then again, you tie it back. Maybe if your health goal is the one with the biggest delta, maybe you need to set aside some money to hire a personal trainer, but maybe there is no financial element to it, and you just want to get 10,000 steps a day, and you can do that on your own.

But what I love about it and what our advisors tell us they love about it is it knits the client and the advisor together, and it allows them in a very practical way. These are the things that lead to a meaningful life, but it's not a woo-woo thing, I think, to have your client tell you that they want to get in shape and then you help facilitate that process and you check on it in an empathetic way. So, I think it's a practical way…one of the biggest concerns I get with a lot of the stuff that I do is they go...advisors will say, "Hey, I'm not a trained psychologist like you, this may be overstepping." And in this case, this is client-led, this is client-directed, it's based on the science, and I think it's eminently practical. So, it gives advisors a way to talk about important, meaningful things that lead to client wellbeing in a way that still feels pretty grounded and practical.

Michael: Yeah, I have a lot of sympathy in our advisor world that as more principles of psychology are coming in, these questions start to arise of, "When am I no longer a financial advisor but serving as a psychiatrist or psychologist? I'm not trained as this, I'm not trained in therapy. These may or may not even be entirely comfortable questions for me because I got into this for the personal finance part, not the psychology part."

But at least what strikes me in what you articulated here, right, just getting into these, here are things that really drive positive outcomes in our lives and happiness, drawn from the positive psychology research, to me, this feels like goal formation. This feels like a goals conversation to me, which is very comfortable standard domain for us as advisors. It's not starting with, "Tell me about your goals. Oh, you want to retire, when, how much?" Or those conversations. It's, "Well, hey, here are things that are associated with positive wellbeing and outcomes for us in life as human beings. Which of these are important to you? How do you feel you're doing on them? Okay, let's talk about those. I want more meaningful work. All right, well, what would you have to change about your current job? Do you need to leave that job? Do you need to leave that company? Do you want to quit the career you've had for the past 30 years and do this fun side thing that you've always wanted to do, that you might not make much money at, but it's meaningful work?"

In the literal sense, great, now let's figure out financially what it would take, and we're going to make a financial plan for that. I feel like I can build and map a lot of goals onto these, and in some ways, even more readily when clients start talking about, "Okay, well, meaning is the thing that's at the top for me." "Okay, cool, how do you feel you're doing on that?" "Not well." "All right, well, what would it take to be doing better on that? What might you do?" And okay, now we're going to get down a conversation of maybe it's philanthropy, maybe it's religion, maybe it's something else.

As noted, not always is there a financial tie-in to that, but often there is. And now I'm... Eventually, this is going to come back to some financial goals, which, cool, that's what I do as a financial advisor. You tell me your goals, I'm going to have a path to get you there in a financially efficient manner. So, I'm struck hearing these. This doesn't feel like we're delving into a therapy realm to me. This feels like another way to do goal discovery with clients.

Daniel: Yeah, I'm really heartened to hear that because if you think about a general practitioner, I think a lot of people don't know this, but about a quarter of all visits to a medical doctor, to a GP, end in a referral to some mental health professional. When I was doing that work, that was one of the primary sources of our referrals is people who go to a doctor ostensibly for whatever physical symptom, and the doctor goes, "Oh, well, this is a by-product of some mental problem." And they would come to us.

I think advisors are right to be thoughtful about walking that line and should expect that some percentage of the presenting concerns that bring someone through your doorway are going to end in you going, "Hey, I'm going to help you with this. If you want some help with this other thing, you should go over here." And people like Meghaan Lurtz and Ashley Quamme have written really great stuff about what that line looks like. There's people who've done that work, and go read their stuff. And so, that's point one.

But point two is, yeah, you're not foisting your beliefs on theirs. Look, if something's important to you and it's not important to them, they'll rank it thusly. And if they think they're doing fine there, they're doing fine there. You're only...it's client-led and it's all about goals discovery and just a different way to talk about these things. And everybody wants to live a happy life. Everybody wants to live a life of fulfillment and flourishing. But I think most people find that concept to be very hard to get your arms around.

And when you say to them, "Hey, this is what a happy life looks like. You do a little work, you have a little fun, you love some people, you work on something bigger than yourself, you stay in shape, and you try and get a little better each day," they would go, "Yeah, that makes sense," and then...

Michael: Yeah, yeah, I'm like that. I don't have a problem with those things. That sounded pretty good.

Daniel: Yeah. When people hear this, there's such a deep sigh of relief to go, "Oh, this is nice. Somebody cracked the code, and now my advisor's going to help me set aside 10,000 bucks a year for a personal trainer or a trip to Japan, whatever it is. And they care about me, and they want me to get better.

Daniel's Journey To Studying Behavioral Finance [1:03:22]

Michael: Right. So, now taking a step back for a moment, so I want to come back and understand a little bit more of your story and journey. How do you get from, I was working on my Ph.D. in psychology and burned out on the clinical work. And magical things happen, and 20 years later, I'm chief behavioral officer at Orion. Help us fill in this path a little bit more. How do you get from, "Okay, I'm getting my Ph.D. in psychology, and I don't want to be a practicing psychologist. What do I do now with my life and career?"

Daniel: Don't you love this? Yeah, and then some magic happened, and I had a really cool career. Yeah. So, I come to my dad, right? And so, to set it up, my dad is a wirehouse advisor in Alabama, where I'm from. And so, this is whatever, 18 years ago. And so, I come to my dad who I have always thought of, it must be said at the time, as being one part stock picker and one part salesperson. That was my concept of his work.

Michael: Okay. Well, and I guess that's pretty fair reflection of wirehouse advisors, particularly if you're back to, I guess, the '80s and '90s when you would have been growing up in the household. That was the broker gig back then. Pick stocks and get your book of clients to buy those stocks.

Daniel: Yeah. Correct. Like, "Hey, I got this hot dot that's got a nice dividend. What do you think?" Yeah, look, I came by that answer, honestly. And so, I come to my dad and I present this, my burnout to him. And I say, "Look, I'm thinking about this." And he goes, "Hey, look, I don't know what's out there in finance," but he says, "I do know that in my work, there's a lot of psychology." And he talks me through. My dad at this time does not know the words behavioral finance or behavioral economics. He's not familiar with that as a concept, but he knows that a lot of the value that he provides is through being a steward of his clients' wealth and their emotions, and helping them in that way. And so, I go, "Oh, interesting."

For that two years, though, my first job is with a small consultancy here in Atlanta, where I now live, that did this pre-employment assessment work. And this was the only company that would hire me. I was applying exclusively to business-type roles, organizational psychology, and the like, and everyone would slam the door in my face because they're like, "You're a clinician. You have no experience in this world. Why would we ever...? All you've ever done is clinical work. Why would we…?"

Michael: Right. So, you've done clinical work across from individual patients who had psychological issues. You can't help us with our business.

Daniel: Correct.

Michael: You don't know business psychology things.

Daniel: Yeah. And to be fair, they were right, to be fair, they were absolutely right. But I had a gentleman take a chance on me and he was himself a clinician and someone had taken a chance on him and he had built this really nice business doing these pre-employment assessments and training for a lot of executive coaching, leadership development, organizational psych type training, but mostly pre-employment assessment, giving effectively IQ tests, personality tests, and culture fit tests to finance and healthcare executives pre-hire, for big jobs, for executive type roles.

And so, he took a chance on me effectively because someone had taken a chance on him, and he knew that it was possible. So, it really took that. He was probably the only person in the world that would have hired me for that role. And just basically, I'm forever grateful for that opportunity. And it's really left me with this sense of wanting to do the same for other people, because I do think...everybody talks a good game about hiring for culture and for talent, and then training for the specific skills, but I find that we're oftentimes really wed to the very specific skills.

And I think there's very few jobs, rocket science or something, where the skills are very hard to learn. I think for a lot of jobs, especially in our world of wealth management, I think most of the time we'd be smart to hire for personality and for talent and train for the specifics. So, yeah, did that for a couple of years, in the process of that, developed some clients in finance and wealth management. And I found consistently that they were the smartest folks I was working with. They paid the best. They were smart. They were interesting. They were kind and they paid well.

And it was while doing that work that I discovered behavioral economics and behavioral finance as a discipline and began to read the works of Kahneman, and Thaler, and Dan Ariely, and the books that were popular at that time. And I knew that I wanted to break away, and effectively, the way that I positioned myself, and that positioning has remained is as a translator between the ivory tower of academia and the advisors doing the work. I think about my dad, right? So, this wirehouse advisor in Alabama who has a vague sense that psychology is important in his work, but isn't familiar with the nuts and bolts of that research, and if he read it, would have trouble applying it to his life.

So, I've tried to be effectively a science communicator and a go-between people much smarter than me working at fine institutions of higher learning, and then the advisors who sit with clients every day, who know that the behavioral piece is important, but may not know exactly what that looks like in applied terms.

Michael: So, where did you actually go next after the pre-employment assessment folks to start doing this? What was the next job step on the journey?

Daniel: So, the next job step was self-employment. So, for some number of years, my goodness, how many, five or six, I was on my own doing a great deal of writing. That's when I wrote my first books. That's when I was probably the busiest I've ever been on the conference speaking circuit, had a couple of organizations take a chance on me, put me on their speakers bureaus, turn me loose on these financial advisor roadshows to begin talking about these things.

And I'll never forget the first...I was trying to get on the speakers bureau of an insurance company. And I was pestering the person who would be able to make that decision and try and get them to pay attention to me. I was all of 29 years old and not a whole lot of experience. And finally, I said... Look, I sent them this exasperated email, and I said, "Hey, I'm going to come up to your office," which was in Boston. I said, "I'm going to come up to your office, get your folks together. I'm going to give you the best presentation you've ever seen. If you don't agree, I'll never bother you again. But if you love it, I want you to hire me, and I want you to put me on your speakers bureau."

Michael: I love this. I love the sheer initiative. Well, I guess, did they take you up on the offer?

Daniel: They did. They did. They did take me up on the offer. So, they took me up on the offer. I went up there, I did a good enough job to... I'm sure it would make me cringe today, but I did a good enough job that they hired me. They put me... I think I did 55 events for them the next year. You know what I mean? They just absolutely... I spoke at every Maggiano's in America.

Michael: Oh, man. So, this is one of the setups where the insurance company makes you available to their advisors to do client events and prospect events. You're the draw to bring people in the room, that kind of thing?

Daniel: Exactly.

Michael: And then you get paid. Were you on staff with them?

Daniel: I was not on staff.

Michael: Do they pay you to get in front of all their advisors? Do the advisors each pay you individually? Just what's that gig? How does that work?

Daniel: Yeah. I got paid corporately. I wasn't on staff. I had other clients, but they were far and away my biggest client. And it was a mix of client-facing events on behalf of advisors, and then speaking to groups of advisors. It was a mix of those two things.

So, that one moment of youthful audacity led to this series of events, which is where I met the person who would later become the chief, Ali McCarthy, who would later become the chief marketing officer at Brinker Capital. And Brinker was getting into behavioral finance. And so, Ali... That was my first W2 job in the industry. It was after five or six years of being solo and doing very well on my own. Ali went from this insurance company over to Brinker. When she got to Brinker, they were in the early stages of exploring applications of behavioral finance to their world. And she said, "Hey, I have just the man for the job." I worked at Brinker for two years before Brinker was acquired by Orion, mid-pandemic.

And yeah, so it's crazy to look back and think about how every good thing in my career was really sprung from that one moment of both luck and grit where you say, "Look, just freaking give me a chance." And if no one had ever given me a chance, who knows what I'd be doing today.

What Surprised Daniel The Most In Getting Advisors To Apply Behavioral Finance Research [1:14:38]

Michael: So, as you, I guess, just reflect on this and the journey and the things that you built, what surprised you the most about trying to get advisors to actually use and apply the behavioral finance research?

Daniel: So, I've been surprised to the upside about the level of enthusiasm for the work. I've been doing this for about 13 or so years, I think. And the level of enthusiasm for behavioral finance has been consistent and growing. And I would say that it's even reached a fever pitch in the last year or two, where it just seems like there's an explosion of tools and books and people doing the work. And I think it's really reaching a fever pitch. So, the enthusiasm has been consistent and growing. That's been really gratifying.

But the frustration has been all along, like, "Okay, this is cool, but what does it look like in my work?" And honestly, I don't know that I always had a great answer to that question. And it's only since I've been at Orion, and I've been able to infuse it into the tech and some of the ways that we've talked about, that I've started to have a better answer. Because one of the things that we know is that there's this knowing-doing gap.

My favorite sad example of this is that nurses smoke cigarettes at nearly double the rate of the general population. And if you ask, and don't do this, but if you tap a nurse on the shoulder and say, "Hey, why are you smoking?" They would go, "Yeah, I really shouldn't. I need to quit." And they know better than just about anyone in the world the physical complications that come from smoking cigarettes, but they're paid poorly, they have stressful jobs, their lives are hard, and so they need a break, and so they smoke.

And the same thing is true of our clients. I think most people grasp the fundaments of good investing. They know they're supposed to be long-term. They know they're supposed to be patient.

Daniel: I actually screwed this up somewhat recently, and it shows the knowing-doing gap. I had a friend come to me at a Christmas party. He's about 20 years older than me. He's entering retirement, and he says, "Hey, I want you to have a look at my statement, tell me how I'm doing, and give me a little advice." Well, he gives me his financial life. He gives me his financial documents.

I live in Atlanta. There's a lot of concentrated wealth here. He worked for one of the large Fortune 500 companies here, and better than 80% of his millions of dollars was in company stock. And I said, "Hey, man, you can't do that." So, tell you right off, "You can't do that. So, here's the name of three advisors. Give them a call. They'll get you sorted out." Okay.

See him a few months later. "Hey, did you call my folks?" "Nope." I get angry at him, and I'm like, "You're being irresponsible. You're being stupid. You know what I'm telling you is good." I get home, I fire off an email about Enron and GE Capital and all this stuff. And I'm like, "Look, these guys thought they had blue chip stock too. Don't be a dummy. You're endangering your family. Call my advisors." And I see him a couple of months later. "Hey, did you do the thing?" "Nope." I go, "Hey..."

Finally, now my training kicks in a little bit, and I finally do the right thing, and I go, "Hey, man, help me understand. There's nothing in this for me. I don't make any money off this. I'm just trying to help you. Help me understand why this is proving so difficult for you." And he goes, "What you're asking of me is betrayal. You are asking me to be a traitor." And then he goes into, "I was this poor farm kid. This company gave me a chance, every good thing in my life, and you want me to stab them in the back."

And I listen to him, and I go, "Wow, thank you for opening up to me. This is rooted in some really wonderful parts of you. You are loyal. You dance with the one who brought you. You're a good friend. You're loyal. You're a trustworthy guy. And I love that about you." And I said, "And what you're doing is still dumb. So, let's talk about that." But Michael, then he was able to have that conversation, but we couldn't... It was never about the math. It was never about me diagnosing. It was never about the diagnostic piece of it. I could have told him all the biases that contributed to his concentrated stock position. He didn't need that. He didn't need the math. He didn't need the behavioral economics.

He needed someone to hear him out and understand him. And once he was understood, everything went away. And that, I think, is the contribution of psychology and a story that illustrates where I hope behavioral finance is headed. It's less about a cataloging of the endless ways we're stupid. And it's more about this thing that's everywhere in the financial planning process, helps us understand our clients because they know what to do. And if we learn to see them the way they want to be seen, a lot of times it's self-correcting once we have seen them.

The Low Point On Daniel's Journey [1:20:04]

Michael: So, what was the low point on this journey for you in trying to build a business, build a career around this?

Daniel: There were multiple low points early. So, trying to make that initial transition from clinical to business psychology felt candidly hopeless for...what felt like eternity wasn't actually that long, but felt like a very, very long time. Then there was this transition into trying to scale my work a little bit, lots of frustrations at various points along the journey of just feeling like I'm spending a lot of time away from family. I'm getting very fat on garlic bread, and I'm not sure that any of this is sticking. I feel like it's useless. And even adult learning theory would tell you if someone hears a talk like you or I give, if someone reads one of my books, not a whole lot of it sticks. And so, there was this feeling of just running in quicksand for many, many years that I was making all of these sacrifices to be away from family, to do the hard work of writing a book or the like, and then just feeling like it was all dying on the vine.

So, those have been the biggest points of frustration along the way is trying...the same thing that makes this work fascinating, makes it maddening, which is the infinite complexity of the human animal, makes this work that never gets old, but also it's not physics, right? It gets really frustrating sometimes because it feels like you're not making a difference. And I think a lot of advisors can probably empathize with that for many of the same reasons.

Michael: So, what changed that suddenly, like it was less quicksandy and it felt like the impact was coming?

Daniel: Well, part of it is I got better at drawing a straight line from theory to practice. When I look at...I found one of my early presentations the other day, one of the very earliest presentations I gave, and I believe it was a 45-minute time slot. And I think, Michael, I had 70 slides and there were...

Michael: Sins we make as early-stage speakers.

Daniel: Oh, my goodness. And I think there was a lot of Nietzsche in there. I think there was a lot of Kierkegaard and all this dorky stuff that I love. I still love it, but I think I was just deeply... I was from that academic world. I was really in love with philosophy and theory, and didn't initially do a very good job of translating the so what of that. And that's been something I really, really tried hard to do. The other thing is, I think the commitment level of advisors has risen, advisors have seen that this isn't going away. They've redoubled their efforts to get good at this. So, I think the advisors I serve have certainly tried to meet me halfway.

And then the third thing I would say is just the technology, right, the technology piece. It's such an easier conversation. We talk about something like PulseCheck. This thing takes less than five minutes to have this conversation. And it's so much easier than me trying to disseminate to an advisor the six pillars of a good life and then having them in turn disseminate it to a client who then has to hopefully do something about it. So, the combination of me working on my game, advisors getting serious about their game, and then the tech enablement process has been a good one, two, three.

Daniel's Advice For His Younger Self And For Advisors Looking To Go Deeper Into Behavioral Finance [1:24:02]

Michael: So, what else do you know now you wish you could go back and tell you 15 years ago, as you were starting down this path in the advisor world?

Daniel: I wish... I think young Daniel tried to tell advisors what they needed and didn't do a good enough job of listening to advisors. That's something... Shoutout to Eric Clark. That's something I really learned from Eric Clark was how to listen to advisors. Any time when I would come to him with a new idea, "Eric, I want to build this," he was always very gently, because he's a gentle guy, but always very gently, like, "Hey, have you asked advisors if they actually care about this?" In kinder terms. And often they did not. And I think younger me was oftentimes trying to tell advisors what they needed and get them to take their medicine, and didn't do as good of a job of listening to the voices of the people I was trying to help.

Michael: So, what advice would you give advisors who do want to start getting a little bit deeper on some of these behavioral finance principles to apply in their practices?

Daniel: I'm going to go back to my mirror and window analogy that I stole from Jason Zweig. I think there is...I know there is a qualitative difference between an advisor who has been thoughtful about his or her values, preferences, approach, and one who has not. They show up as infinitely more humble and more approachable. There's research to suggest that the two things that clients are most fearful of when they present to an advisor's office are judgment and jargon. And I think that advisors who have been through that process of self-examination are much better about avoiding the two evil Js of judgment and jargon.

So, I think I'll bring it back to the psychotherapeutic literature. When you look at where I went to grad school, we were known for what's called outcomes literature. And basically, outcomes literature says when someone goes to psychotherapy, who gets better and who doesn't, and why. And depending on who you ask, it's either the first or the second most predictive variable is the relationship between the client and the therapist.

And I think there's every reason to believe that generalizes to the work of a financial advisor and her clients is to say, "Look, everything you're asking them to do is hard, but if they care about you and you know that they care about them, it's going to work itself out." That's more powerful than a thousand little bag of tricks I could give you, is if that relationship's there, a lot of the other stuff's going to fall into place. And one of the best things you can do for that relationship is to have done that work on yourself and have been thoughtful about who you are and how you show up.

What Success Means To Daniel [1:27:27]

Michael: Very cool. So, as we wrap up, this is a podcast about success. And just one of the themes that comes up is literally that word success means very different things to different people. And so, you've had this incredible career journey around behavioral finance to now lead the whole shebang for Orion. And so, it seems the career journey has been incredibly successful. How do you define success for yourself at this point?

Daniel: So, I am a person of faith, and my faith teaches me that two things are enduring, two things and only two things are eternal, and you can take with you, and those things are relationships and knowledge. It's my belief that relationships and love lives on, and the things you learn live on to your betterment.

And so, in my more lucid moments, I'm as prone as the next person to getting caught up in a work fire or whatever small thing is making me angry that day, but in my more successful moments, true success to me is working on those two things, deepening my relationships with the two handfuls of people who really, really matter to me, and trying to search out truth and trying to learn more about myself and the world around me. And that's when I'm happiest, when I'm working on truth and relationships.

Michael: I love it. I really like that framework. Thank you, Daniel, for joining us on the "Financial Advisor Success" podcast.

Daniel: Thank you so much.

Michael: Absolutely. Thank you.