risk profiling tools

How Cetera’s Risk Profiling With Facial Recognition Can Turn Any Advisor into Dr. Phil

“How does this make you feel?” is probably not a question that many financial advisors usually ask their clients.

While there is a tremendous amount of practice management content that targets advisors, not much of it is helping advisors to be more empathetic.  Yet, those that have done some research on empathy believe it can be one of the most important factor of an advisor’s success.

But not every advisor comes into the profession with the same level of empathy.

Research has shown that what we say communicates only 7% of the meaning in a conversation. Non-verbal communication makes up 93% of the content! This is typically delivered through:

  • Facial expression — overall, eye contact and mouth position
  • Voice quality — tone, intensity and pace
  • Body language — position and gestures

But what about advisors who aren’t good at processing non-verbal communications?  They’re missing the boat and not fully hearing what their clients and prospects are feeling, meaning and communicating.

Technology Levels the Playing Field

It’s time consuming to train people to improve their ability to pick up on non-verbal clues.  There is also a ceiling on some people’s abilities so they would always be at a disadvantage.

This is where technology comes into play.

Cetera Financial recently announced that they were partnering with an AI startup called nViso to develop risk profiling software powered by facial recognition.

Finally a real-world use for artificial intelligence!

The product is called Decipher and looks to me as though it is a savvy combination of risk profiling, client engagement and advisor guidance. If it works as proposed, it will be of incredible assistance to advisors helping them to better understand their clients motivations, fears and goals. (See 19 Ideas from the T3 Advisor Conference That Your Boss Needs to Know)

It could also make them seem to clients and prospects as though they are “super empaths.” Like a Dr. Phil for wealth management, without the TV show.

nViso refers to their software as “emotion recognition.”  It does this by recording a person’s face using a laptop’s built-in camera and then interpreting the facial micro-expressions and eye movements.  The data is compared against a machine learning system that has be trained with over 400,000 faces and their corresponding emotions.

Clients and prospects are recorded while they watch a series of 12 very short video snippets (maybe 10-12 seconds each) about different life events.  The output is what the software determines is the person’s emotional reaction to each topic.

Before watching the video, you’re walked through a sort of risk tolerance questionnaire, although I found the questions to be poorly worded and confusing.  The output is later compared to the results from your emotional responses and the differences are highlighted.

I believe the goal of all of this is to provide simple prompts that encourage meaningful conversations between the advisor and client.   

risk profiling tools

Some advisors just aren’t good at picking up non-verbal cues like facial expressions and body language. Although, this software isn’t looking at the person’s body, so it can’t evaluate that, either!

But the software can level the playing field between advisors who are naturally empathetic and those who are not. It is a way to automate that expression, “I’m naturally good at reading people”.

Increasing Onboarding Efficiency

I was fortunate to catch up with George Karris, SVP, Head of Strategy for Cetera, at the Collision 2019 technology conference in Toronto, and he gave me a demo of Decipher.  Karris said that the software is currently in beta testing with around 50 advisors and the results so far are encouraging.

Advisors who went through the process with clients said that they felt that they could understand their emotions faster than they could without it, Karris reported. This translated into a reduction from the normal 4-6 hours to understand clients emotions down to just 1-2 hours.

If this is real and can be replicated across the Cetera advisor force, that would be a tremendous time savings during the onboarding process.  It would allow advisors to use their newly freed up time for other more productive tasks such as financial planning, getting to know other aspects of the client’s lives and/or families or even scaling up and working with more clients than they could before.

There’s definitely tremendous potential here. But can Cetera harness it and execute on what needs to be done to turn these tests into widespread success?

Future Potential

One of the areas that have tremendous potential is the peer comparison function.  When you get your emotional results, they’re compared to your “peers” and shown whether your response was more or less. I’d like more information on how they determine who your peers are, I think that would be helpful when interpreting the data.

But it’s another great talking point for advisors to try and go deeper on their client’s emotions and motivations that drive their reactions to different planning issues.

“You understand me better than anyone outside of my family.”  This is what one advisor reported that a client told him after going through the Decipher system.  That’s impressive, assuming that it was the software that made it happen rather than the advisor doing it on his own.

Listening and understanding more about what a client is feeling is crucial to the connecting step when empathy occurs. This is where the software can step in and prompt the advisor to tell the client how they understand what the client is feeling, validate it and correct where necessary.

This is referred to as “reflecting” and can create a deeper connection with clients. Phrases like “I think you’re feeling worried about your retirement, can you tell me more?” or “I’m hearing you feel scared to move ahead with this plan. What are your thoughts on that?” are reflections. The software can suggest these phrases while reviewing the results.

That’s one of the keys to figuring out if this is even working as promised.  A real statistical analysis and some serious testing to create baselines for advisor’s level of empathy before using the software and afterwards.  I would also recommend some surveys of clients and prospects to gather their opinion of their advisor’s level of empathy before using the software and afterwards.

A Different Way to Profile Risk

I was definitely confused by the questionnaire given before the facial recognition went to work.  The output categorized you into one of three “thinking” buckets: 1) past, 2) present, or 3) future.   Maybe Karris just didn’t explain it very well, but I wasn’t getting the distinctions.risk profiling tools

For example, clients who are in the past thinking bucket want to see back-testing and other historical data before choosing an investment plan. That makes sense.

But then, I was mapped into the present bucket because I have strong habits like working out six or seven days a week and eating very healthy.  I thought that would be the future bucket because I’m thinking about the future when I do these things.  But the system decides that is present because I’m taking action in the present.

I suggested the future bucket be relabeled as the “procrastination” bucket.  Although, that probably won’t go over too well with clients.

Everyone is supposed to have some of each of the three ways of thinking in them. They just have them in different amounts.  This is already useful for starting another conversation with the client.

Is It A Game-Changer?

In its current form, this is merely a fancy conversation starter for advisors.

But what can transform this software into a disruptive game-changer is the recommended actions that are generated for the advisor and clients when the results are displayed. What kind of patterns will emerge after Cetera advisors run the software 10,000 times? 100,000 times? There could be incredible insights into client behaviors and how their emotions link to their actual goals and needs.

What if the software could provide specific actions that the client could take to nudge them from a Future Bucket (procrastinator) to a Present (do it now)?

What if the software could provide the advisor with carefully-worded phrases to use when explaining each topic to the the client?  People do naturally fall into different categories based on how they interpret new information. The system could select the wording that would have a high probability of being received positively by the client. That would be valuable!

And this is where we are getting into the Dr. Phil Zone as I’m going to call it.  Imparting empathy super powers onto the advisor via the software.  Prompting the advisor with what would be the most empathetic thing to say to the client at just the right moment during their conversation.

This could also become creepy if it isn’t implemented correctly. (See Can Big Data Make Risk Tolerance Questionnaires Obsolete?)

Risk Profiling Tools

But this is a ways down the road. Cetera needs to roll this out to a few thousand advisors and check the results after a few months or a year of client interactions.

They could also map the results into Envestnet | MoneyGuide to see how their emotional responses map to their goals. Or maybe goals could be automatically generated based on their emotional responses?  That would also save some time.

Advisor training is also a very important part of this process. The technology will be useless if advisors are properly trained on how to use it and how to use the suggestions when talking to clients. There should be a specific training process with different levels and I would suggest role playing to ensure they understand how to handle difficult situations that might arise from the conversations that the software generates.

In the end, it’s all about how the clients feel afterwards.  Do they feel a tighter bond with their advisor after going through this process?  How would they rate their advisor relationship on a scale of 1 to 10? And how are clients rating their advisors now? Is their Net Promotor Scores increasing or decreasing?

I’d also like to see some data on changing clients’ bad behaviors. Can this software increase the change towards better financial health?

Whether it fulfills it’s potential or not, I believe that Cetera has shown that they are investing in potential disruption. It demonstrates that they are committed to leveraging advanced technology to help advisors be more productive and build stronger client relationships simultaneously.  Lofty goals, but they are within reach.

Other broker-dealers and RIAs should take notice. Facial recognition might be the future of risk profiling.