Ladenburg Thalmann Financial Services has introduced a new training program aimed at helping advisors earn the Behavioral Financial Advisor designation, developed a few years ago through a partnership between Kaplan and think2perform, a consulting firm specializing in behavioral finance. The new program will be offered across Ladenburg’s broker/dealer subsidiaries, which include Securities America, Triad Advisors, KMS Financial Services, Investacorp and Securities Service Network.
So far, 150 advisors have gone through a pilot version of the program, of which about 100 earned the designation.
The idea behind Behavioral Finance was to help advisors provide additional value to clients beyond financial planning and investment management (which are experiencing fee compression or becoming commoditized). The program is an interdisciplinary school of thought that links investing, neuroscience and psychology to help advisors better understand why investors sometimes make costly, irrational decisions with their finances.
“We also thought there would be an opportunity to differentiate in the advice arena by emphasizing behavioral financial advice, which is really recognizing how emotions influence our financial decision-making around investing, saving and spending and providing advisors with tools to help clients make the best decisions they can,” said Kirk Hulett, head of practice management, who holds the BFA designation himself. “Emotional decision-making can really skew, can really damage some of those financial outcomes that clients are looking for.”
The program is taught over a three-day workshop. The first day focuses on helping the advisor build emotionally competent habits and recognize their own unconscious biases.
The second day is focused on the client. Advisors are trained to help clients identify their values, or deeply held beliefs, then link the values to the financial goals that the client is setting. Then the advisor is taught to link those goals to the client’s everyday spending, saving and investing behavior.
“Just a week or so ago, an advisor told me he used this to help some long-term clients who were trying to decide where to retire—locally where they lived now or retire to a warmer climate where they would build a house far away,” Hulett said. “He took them through that values alignment process. Does that life decision and that financial decision align with their previously stated values? Some of their values were around maintaining strong friendships and maintaining strong familial relationships, and what they realized through this conversation was that they were kind of living someone else’s retirement dream and that moving away didn’t let them live those values. And they decided not to make that investment.”
The curriculum has also helped advisors deal with client concerns over the recent market volatility. “They’ve been able to use some of these techniques to re-orient them back to ‘What are your long-term goals, backed up by your values around your life and your money?’” Hulett said.
After the second day, program participants take a one-day break and come back for the third day of the training, which focuses on sharing best practices and role-playing, with the ultimate goal of preparing them for the BFA exam.