John Hancock Finance has launched a new program that utilizes behavioral finance concepts in order to help advisors understand client emotions and build better portfolios.
Called “Hard Wired,” the program is a two-part continuing education course. The first part is called “What Were They Thinking?” and uses behavioral finance concepts to help advisors understand and manage client behavior. The second part, called “Building Better Portfolios: Portfolio allocations that help minimize irrational investor behavior,” is a course that incorporates behavioral finance to help advisors devise appropriate asset allocations. The program runs through the end of the year.
Kristine McManus, vice president of sales development for John Hancock, says the program is especially timely after the crisis left clients, and some advisors, shell shocked. “We want to give advisors language they can use to start talking to their clients differently,” she says. “Most advisors throw data but throwing data at an emotional problem doesn’t work.”
John Hancock sent members of its sales, marketing and product-development teams to a course at the Harvard Kennedy School to learn about behavioral finance in order to prep for the program. “The response from the field has been phenomenal,” McManus says.
The Hard Wired courses will educate advisors about how physiology and reasoning can impact the investor behavior, especially during times of great stress like in 2008. Included in the program is a one-page summary on the three levels of brain function—reptilian, mammalian and hominid—that controls such things as rational thought and fight or flight.
“In a moment of stress blood stops flowing to that rational part of the brain and the emotional part lights up and the flight or fight takes over,” McManus says. “The rational part of your brain shuts down. Most people who moved to cash regret it and wished they hadn’t.”