John: [00:00:07]

Julie, in June of 2023, will mark my 35th anniversary of being in this industry. And I’ll bet you every one of those decades I’ve heard about behavioral finance, and it’s one of those things, you know. In fact, Julie, on our team, we often get asked about, “Do we have behavioral finance topics that we come out and speak about?” And I have to kind of say, “You know, I’m not sure, but I don’t think so because I think behavioral behavioral finance is all about theories and biases. And but we do talk a lot about investor behavior. So is that behavioral finance?” So it’s kind of a it’s kind of an all encompassing, almost confusing topic, if you ask me. [00:00:50][43.5]

Julie: [00:00:51]

Oh, I couldn’t agree more. So, in June of 2023 will be my 25th year in this industry, and I could hardly put pen to paper and define in a really concise way what behavioral finance is. I think it is a swirl and typically this more theoretical definition, and I know that Brian has really committed himself and his career to defining this and making it much more tangible and really a topic and a framework that financial professionals can truly use to deepen relationships with clients and engage with them. So I’m very excited to hear more about how he can help all of us take theoretical down to practical and implementable. I know that’s not a word, but that’s my favorite word. [00:01:39][48.5]

John: [00:01:41]

Well, I think I think that’s the key, right? Oftentimes we hear the theory. Sometimes we may even use this content to entertain and educate our client audiences, but there’s not a lot of people, I don’t think, who really make it practical and implementable, to your point, in our daily practices. So I’m anxious to invite our guest today on the podcast to listen in on a conversation that we recently had with Brian Portnoy. So why don’t you share with everyone, Julie, a little bit about Brian Portnoy and kind of why he’s here on our podcast today? [00:02:15][34.1]

Julie: [00:02:15]

Absolutely. Brian Portnoy, Ph.D. in CFA, is an expert in the psychology of money. He’s the founder of Shaping Wealth, a coaching and content platform inspiring financial well-being globally. Brian’s multiple bestselling books have been published in eight languages, and one of them, The Geometry of Wealth, inspired his current venture. He previously worked for nearly 20 years in the hedge fund and mutual fund industries as investor, researcher and educator. Brian lives in Chicago with his wife, three kids and a dog named Freddie. [00:02:47][32.1]

John: [00:02:50]

Hi, I’m John. [00:02:50][0.6]

Julie: [00:02:50]

And I’m Julie. [00:02:52][1.3]

John: [00:02:53]

We’re the hosts of the Hartford Funds Human Centric Investing Podcast. [00:02:56][3.4]

Julie [00:02:57]

Every other week, we’re talking with inspiring thought leaders to hear their best ideas for how you can transform your relationships with your clients. [00:03:06][8.7]

John: [00:03:07]

Let’s go. [00:03:08][0.3]

Julie: [00:03:09]

Hello, Brian. Thanks so much for being here with us today on the Human Centric Investing podcast. [00:03:13][3.7]

Brian: [00:03:14]

It’s my pleasure. [00:03:15][0.3]

John: [00:03:16]

So, Brian, I think I’ve been hearing the terms behavioral finance for decades now, and it kind of reminds me of the way people use financial wellness. Like the same words mean different things to different people. So when I think behavioral finance, I think of biases and those kind of things, but it’s all very theoretical, right? And sometimes we use it for entertainment purposes in front of our clients, right? To kind of cue them in terms of what behaviors they need to be on the lookout for. But, I sense that you look at behavioral finance, given your background in a different way. And so, give us your definition of how Brian Portnoy looks at behavioral finance and what it means in the financial services industry. [00:04:01][44.8]

Brian: [00:04:03]

Thanks. I appreciate that. It’s a very big question. You did say we have 4 hours. Yeah. Good. Let let me start lecturing. No, let me let me try to give you a short, crisp answer. And it starts with the fact and most people won’t expect this coming from me, is that behavioral finance to some extent has been a failure in the wealth management industry. Behavioral finance itself has been an unbelievable success. There’s a wonderful back story about two random Israeli psychologists who looked at the American economics profession and said, “You guys don’t know how human beings actually operate.” And so they created this field. Kahneman and Tversky and Dick Thaler adopted it in the U.S., and here we are with Nobel Prizes and movies about baseball starring Brad Pitt. So it’s become a very popular thing. The challenge is that from a very practical point of view, this idea of behavioral finance. Behavioral finance, meaning the psychology of money or the intersection of economics and psychology. A lot of that literature is focused on how we are flawed as human beings. We anchor on this word bias, and there are literally hundreds of quote unquote, biases that define who we are. The financial advice business wealth management has embraced that bias approach and basically put advisors in a spot where they are almost compelled to use this verbiage to diagnose and even try to fix their clients because they’re acting as irrational people.

Brian: [00:05:42]

And so, yes, you’re correct to say that I have a very different point of view, because at the end of the day, we want to help our clients flourish. We ourselves as advisors and coaches, we want to flourish. So how can we use the existing wisdom and science in order to achieve that? In my view, we need to go beyond bias, and that happens in a few different ways. Number one, like you alluded to, we escape the theoretical approach and make it very practical. When we look at practice management and the actual process of financial planning, how can we integrate our deep understanding of what makes us all human?

Brian: [00:06:17]

So another perspective that we bring to bear is that we want to stop referring to biases and we want to stop labeling our clients as irrational or for that matter, rational. What we need to do, I think, is embrace us as just being normal, that we are adaptive and that the way we are the human condition, things like loss aversion, this idea that losses are more painful than than gains are pleasurable. That’s not a bias. That’s an adaptive response to us surviving and thriving over many, many millennia. And so let’s think about us not being irrational, but being normal. Let’s pivot away from biases also by accepting that our brain has two hemispheres and that even though we are trained analytically, we succeed and elevate our clients by acting empathically.

Brian: [00:07:12]

So yes, of course we need the spreadsheets. We also need listening skills. We also need to indulge our emotional intelligence. Lastly, not lastly, but the last point I’ll make is, you know, this idea that we in finance think of ourselves as calculators, as numerical, that everything is going to come through a spreadsheet and be perfectly clear. But the fact is we were not born as calculators. We were born are storytellers. Let’s embrace the power of story, not in a woo woo sense, not in, you know, sort of a cinematic sense, but just in the idea that our brains are wired. The neuroscience of storytelling is actually quite fascinating and that our brains are wired to think in terms of story and narrative. And from a practice management point of view, it’s actually quite easy to rethink financial planning through the structure of narrative arc to bring things like the hero’s journey into the conversation with the client where they are the hero and we are the guide. There’s so many more things. There’s such a bright technicolor vista of how we can help our clients that go beyond the narrow, traditional boundaries of what we’ve called behavioral finance. [00:08:19][256.6]

Julie: [00:08:21]

It’s so interesting, Brian. My mind is swirling. And because I think what you said, and I think it bears repeating, is that, you know, behavioral finance is not about trying to fix something that’s broken or help us make the right decision or, you know, the most healthy decision. That really it’s it’s we’re not trying to fix something. It’s sort of appreciating maybe those flaws and then being able to have great conversation to move through them and to really build the plan, pull the pieces together. So that just it’s so interesting because I think, you know, even after so many years in the industry, and I’m sure John would agree, that this term is used, but it’s hard to really make it tangible. And I feel like the work that you’re doing is really taking it from this concept to what can I do? How can I think differently? How can I ask different questions? How can I evoke different emotions from my clients? But again, not with the lens of “I’m trying to fix something that’s broken,” but “let’s just let’s just really have a great conversation.” Could we dig into that a little bit more? What are some of the tools or questions or, you know, tangible things that really help bring this concept to life in in the training, coaching and advising that you do with financial professionals? [00:09:39][78.1]

Brian: [00:09:41]

Yeah, sure. So I think part of the process starts with anchoring on the questions that really matter to the people that we serve, to the people we actually genuinely care about. I like to think that there are two main questions. Am I going to be okay and how much is enough? So what I refer to as the evolutionary two step of survive and thrive. Those two questions map to the two step on the survival part. Am I going to be okay? We are loss averse. We fear paying more than we enjoy pleasure, because you can only lose the game once. You don’t have to win every day, but you can’t lose more than once, right? So we’re wired deeply wired with that survival instinct. And so much of the time, whether it’s explicit or not, and it usually is not, a client is showing up in your office or on a call or on a zoom or in a text, and they’re sort of asking, are we okay? Are we good? Are my loved ones okay? So embracing that, that messy, sloppy but beautiful and important question is front and center all the time, even when it’s not being said out loud. Well, we not only survive, we thrive. We not only keep our feet on the ground, we keep reaching for the stars. And then we ask, well, how much is enough?

Brian: [00:10:50]

Okay, we live in an era of abundance. And I think one of the most profound challenges we have is to reconcile the fact that we’ve never lived in more prosperous times and we’ve never probably struggled more as a species with things like anxiety and depression and loneliness, things that we kind of don’t want to talk about in financial advice, but they’re right there. And so this question of enough. Because economics assumes that more is better in the real world, you know, let’s channel content and diversity here. In the real world, more isn’t always better. There’s something known as the paradox of choice. So how can we work with clients to help them understand that just because two is greater than one and four is greater than than than two, just getting to that higher number doesn’t mean that you’re going to be happy. Ultimately, I think where human centric financial advice is, and you guys run a human centric podcast, human centric advice is based in the discipline of positive psychology, the science of happiness, as opposed to behavioral finance, which is more about cognitive psychology and narrowly defined decision making, and us engaging with our clients on the bigger questions of “What is the life that you want to live?” And then more specifically, “Where does money fit into that quest for a purposeful and meaningful and happy life? Where does our financial life connect to the other forms of well-being physical, emotional and spiritual well-being?” What we’re seeing globally is that there’s a handful of firms that appreciate these big picture questions they’ve always been asked, but now it’s kind of legitimate that you can ask them out loud and they’re investing in tools and people and resources and perspectives that allow these conversations to go that much more smoothly. And getting away from the old school “Oh, here’s a list of 101 biases.” Boy, are you flawed. [00:12:45][184.2]

John: [00:12:47]

And Brian, I think that’s important. When I heard you say about not trying to, not trying to fix our clients. Right. Combined with this idea of adaptability, what I often find is, you know, as you mentioned, we’re a very quantified industry. Right. We want, we want somebody number on the risk tolerance scale there. They’re out six out of ten, they are four out of ten. They should be a seven, but they’re a four. But like when I think about those biases, there’s those kind of big picture human biases that, you know, psychologists would probably argue developed over time, guiding our systems of fear and anxiety, so on and so forth. But oftentimes, I find through that, through that story that you talked about is understanding the individual client’s story helps us understand how they personally have adapted. So I just think of a client that, you know, again, they were on a risk tolerance scale before, and given their age and their wealth, I would have said, gee, they should be a seven or an eight until they shared with me that as they were a young child, their their household home was very unstable when it came to employment and cash flow. Dad couldn’t keep a job always caused arguments in the family. And now all of a sudden, you know, that risk tolerance didn’t look so unjustified. In fact, it helped give me a better picture of who they were. Can you talk a little bit about the importance of stories? And here I want to I want to ask you about two stories. One is, how important is it to get the client to tell us their story? And secondly, should the advisor have stories of their own to communicate to the client, either to a line or at least to share with the client a little bit more about who they are? How do you approach that topic of stories? [00:14:34][107.3]

Brian: [00:14:36]

Well, one way that we approach it is a workshop called Storytelling for Advisors. And let me tell you exactly what we cover in there because it answers both of your questions because we are wired for story and not particularly numerate. We’re really not wired for for being calculators. We we know that being able to tell our own story, however we so choose, is a form of independence and freedom that we absolutely cherish. And so being able to your point, John, of having the client empowered and, you know, given the opportunity to talk about who they are and how they got here. You mentioned risk tolerance questionnaires. I’m going to be polite on this podcast and just say that there is a lot of performative theater in these supposedly technical and precise risk tolerance questionnaires. They are often just a check the box exercise so that somebody somewhere can say, ‘Oh, we took stock of what their risk tolerance is.’ And lo and behold, when the real world happens to that person and it doesn’t square with the RTQ queue, well, the questionnaire should be binned and we should just start doing what we should have done from the very start, which is listen to what they’re telling us about not only what they want to have, not only what they want to do, but who they want to be having, doing being.

Brian: [00:16:00]

That’s the stack and the good advisors, the modern advisors are working across all three levels because they do attach to all of the dimensions of money, life, the possessions, the things that we buy. These are absolutely necessary. We shouldn’t denigrate them, but it’s just the beginning of the stack. Beyond that, what’s the experience of life? What are the things I want to do? Who do I want to be engaging with? And then most deeply, who is the future self that I am serving? Who is it that I want to become? What are my possible future selves? And so there are specific techniques that can be used that are not scary, not woo woo, not overly invasive, where you can ask people, “Well, why are you here today? What is it that you want to accomplish?” And having the listening skills and a whole variety of other skills tied up with this dimension of emotional intelligence called empathy and being able to be there and not just in a one shot affair, like, “Oh, okay, I’ve onboarded you great. I’ve been empathetic. Time to move you on. You’re now on my spreadsheet.” But no, like build that relationship. And even if you want to be commercial about it so that when the client passes, the spouse stays with you.

Brian: [00:17:10]

When the parents pass, the children stay with you so that when there is disruption in the family, you have multigenerational loyalty. There there are narrow and broad incentives to engage in this sort of storytelling exercise. And it also begins, John, with the advisor herself, understanding what her own money story is. I’ve published a book with Josh Brown and Karl Richards on Storytelling for Advisors. I now run workshops on it. It’s part of our coaching programs, worked with hundreds of advisors, I would say 90 plus percent of established financial advisors have never written down their money story or what money means to them. And the near-universal response to this exercise, when they choose to go through it with us, especially when they’re willing to be a little bit vulnerable, is, “Wow, that was hard. Thank you.” The fuel in the tank of empathy is self-awareness. The storytelling powers your self-awareness, which powers empathy, which creates this dynamic, truly human centric approach to advice, which is where the true competitors are going to be globally in the generation to come. [00:18:27][231.2]

Julie: [00:18:29]

It’s so interesting connecting story to wealth and really peeling back the layers and having that reflective moment. Brian, you have defined true wealth in a unique way, when we chatted previously and when I read about some of your your books and your works, would you share that with our listeners today? Because I think it is just such an interesting take on that definition and frankly, a definition that many of us have heard in so many similar ways for so many years. And yours just really stood out and certainly peaked my interest. And I’m confident our listeners would also be interested to hear your definition. [00:19:09][39.5]

Brian: [00:19:10]

Yeah, for sure. So I do feel like there’s a fork in the road for all of us between being rich and being wealthy. Rich is the quest for more and the quest for more is often unsatisfying. You know, line from Mad Men, one of my favorite shows, “Happiness is that feeling right before you want more happiness. “That that’s sort of the quest for more. Well, if you choose the path toward true wealth, that’s what I call funded contentment. This is the idea that true wealth is the ability to underwrite a life that’s meaningful to you. And the order of operations, so to speak, is to focus on the contentment first and the funded second. So to this, our conversation right now about, well, what is human centric advice? What is human centric planning? It starts off not with behavioral finance, but with focusing on well-being and happiness and just asking foundational questions about, “Well, what does a meaningful life look like for you?” Not what makes you sort of happy in the dopamine sense on a day to day basis. But, what is a deeply meaningful life? And what’s beautiful about humanity is that we all have our own unique answers. And so there’s different ways and frames to to define, well, what what is contentment to you? And then once that’s established, at any moment in time, it’s going to be updated countless times over the course of noisy, noisy lives. But once we’ve established, well, what is contentment? Well, then we can ask some very fundamental questions about, Well, can I afford that life? How do I underwrite that life of meaning? And this creates kind of just a slightly different and I think, powerful and practical perspective on talking with clients about what really matters to them. You’re still focused just on the financial piece of it all, but it’s a much broader, richer, deeper experience for everybody involved. [00:20:57][106.6]

John: [00:20:59]

Well, Brian, we we talked an awful lot during this episode about the importance of stories. Which brings us to that, Julia, my favorite part of the podcast, which is learning a little bit more about Brian Portnoy’s story. So if it’s okay with you. Julie and I are going to fire at you what we call our Lightning Round question. So brief questions, top of the mind answers really to allow our listeners to learn a little bit more about Brian Portnoy and his story, if you will. So why don’t Julie, you want to take the first question? Why don’t we start there? We’ll roll them if you’re ready. [00:21:34][34.4]

Brian: [00:21:34]

I’m a little nervous, but yeah, let’s do this. All right. [00:21:37][2.6]

Julie: [00:21:38]

Well, I’m going to start with my favorite. On a scale of 1 to 10, how good of a driver are you, Brian? [00:21:42][4.4]

Brian: [00:21:44]

I’m a nine.

Julie: Excellent.

Brian: I’m a nine. I know the studies, too, on self-reported driving skills. I know the studies, Julie. Okay. Don’t try to trick me. But yes, I’m absolutely a nine. [00:21:56][11.2]

John: [00:21:56]

Brian, are you. Are you a cat person or a dog person? [00:21:59][2.6]

Brian [00:22:00]

Dog person. Freddie is in the next room, and I love him more than my kids. [00:22:03][3.0]

John: [00:22:03]

What kind of dog is Freddie? [00:22:04][0.9]

Brian: [00:22:05]

He is a cavapoo. He is a year and a half old cavapoo. He has topped out at seven and a half pounds. [00:22:10][4.8]

Julie: [00:22:13]

What’s the best age? [00:22:14][1.0]

Brian: [00:22:18]

That’s a really good question.[00:22:23][5.0]

Julie: [00:22:23]

I don’t know. We’ll see. [00:22:25][1.2]

Brian: [00:22:25]

Well, you know. Well, so the answer I’m going to give is contrary to the scientific evidence. You know, the evidence on kind of this smile shaped happiness curve. I should be at the trough, but I’m 53. I love being 53. I feel like I’ve got a perspective on so many great things. So I’m going to I’m going to vote for my current age because I love where I’m at. [00:22:43][18.0]

John: [00:22:45]

All right. Brown paper to do list or digital. [00:22:46][2.0]

Brian: [00:22:48]

Combo. Okay. Plus notion. Yeah. I use notion as like my own personal and company platform for all note taking. But then I won’t hold up the stack of To-Do lists that are right here. But I have I do like writing things down for the express purpose that I love being able to scratch things off of a list. [00:23:09][20.3]

Julie: [00:23:10]

I hear you on that. That’s one of the pure, joyful moments in my life. So sad but true. Yeah. So would you rather binge a TV show or watch a movie? [00:23:20][9.4]

Brian: [00:23:22]

I’d rather binge a TV show. Because we’re in the golden age of television. So these TV shows, you know, some of them, it’s like a ten hour movie. So I’d rather watch a ten hour movie with with breaks than than a two hour movie with no breaks. [00:23:38][16.0]

John: [00:23:40]

What’s your favorite holiday? [00:23:41][1.0]

Brian: [00:23:44]

Thanksgiving. Yeah, I just it just it’s. It’s the least complicated. You know, it’s like mom, apple pie and Thanksgiving. Like, there’s nothing controversial about it. It’s just the time to count our blessings. I get to be with my kids and relatives and, yeah, Thanksgiving by a long shot. [00:24:03][18.4]

Julie: [00:24:04]

I’m guessing you’re not the chief chef for Thanksgiving. [00:24:05][1.7]

Brian: [00:24:08]

My sister in law’s son, so our nephew is a professional chef. He cooks every year. And I’m not even a big turkey guy, but boy, does he make it so good. [00:24:17][9.7]

John: [00:24:18]

Oh, there’s good background behind the answer. Julie right? I think that’s. [00:24:22][4.1]

Julie: [00:24:23]

That’s what I was going to say, I was going to say… [00:24:25][1.9]

Brian: [00:24:26]

I just sit around watching football. Yeah. [00:24:27][1.2]

Speaker 1: [00:24:29]

Well, Brian, on behalf of the listeners who I know are and have enjoyed our episode, I want to thank you on behalf of Hartford Funds for joining us on the Human Centric Investing podcast today. And Julie and Brian, if you could share a little bit with our listeners, just a bit more about if people are kind of interested in this topic, want to learn a little bit more about Brian and the work that his company does, Julie, where would they go? [00:24:54][24.8]

Julie: [00:24:54]

So absolutely. They would head to Shaping wealth dot com, which is a learning and development platform powered by behavioral science training, financial advisors and the psychology of financial planning. They bridge leading evidence based insights from behavioral finance, positive psychology and emotional intelligence with timeless wisdom on a life well lived to deliver experiences that serve individual growth, team building and client engagement. And Brian, to wrap us up today, any other details you’d like to share with us and our listeners about shaping well? [00:25:26][31.5]

Brian: [00:25:28]

Just that at shaping wealth dot com, you can get a quick sense of who we are and what we believe and how we engage with financial advisors and advice firms all over the world. [00:25:36][8.0]

Julie: [00:25:38]

Well, thank you again for sharing human centric insight on our human centric investing podcast. We truly appreciate. [00:25:43][5.4]

John: [00:25:43]

It. [00:25:43][0.0]

Brian: [00:25:44]

Yeah, that’s great. Thank you, guys. [00:25:45][0.9]

Julie [00:25:46]

Thanks for listening to the Hartford Funds Human Centric Investing Podcast. If you’d like to tune in for more episodes, don’t forget to subscribe wherever you get your podcasts and follow us on LinkedIn, Twitter, or YouTube. [00:26:00][14.0]

John: [00:26:01]

And if you’d like to be a guest and share your best ideas for transforming client relationships, email us. Guest Booking at Hartford Funds dot com. We’d love to hear from you. [00:26:11][10.2]

Julie: [00:26:12]

Talk to you soon. [00:26:12][0.6]

John: [00:26:14]

The views and opinions expressed herein are those of our featured guests who are not affiliated with our concerts. [00:26:14][0.0]

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