Retirees Behaving Badly

Despite the havoc it wreaked, the financial market collapse actually proved to be an extremely opportune moment for Augusta, Ga.-based financial management firm Apexx Financial.

“We took it as a time to get ourselves together and relaunch our business model in a totally different way,” says Ted McLyman, CEO of Apexx.

The firm is now centering its approach to retirement planning around the principles of behavioral finance, seeking to determine before anything else how its clients think and feel about money. McLyman–who heads Apexx’s new Behavioral Financial Group–believes behavioral analysis is the most important part of proper retirement planning and finance, and even before advisors look at their clients’ risk appetites and try to assess their income needs in retirement, they should be aiming to get a keen sense of how they behave vis-à-vis money, and what actually motivates them to take certain decisions.

“Human beings have a thinking and a feeling brain and this is what we want to get a sense of,” McLyman says. “We all have an ongoing bucket list of what we want money for–these are not our goals, they’re what gets us out of bed in the morning and through the day, and if we can get a sense of that, of the important things for which we need money, then we have a chance of planning better for the long-term.”

Using academic research together with established principles of behavioral finance and economics and his own experience in the field (McLyman is a former Marine Corps officer who taught behavioral economics at the U.S. Naval Aacdemy), McLyman has set  up a model that screens Apexx clients for their behavior and attitudes toward money. Clients are asked a series of questions and made to take a few tests, and the answers they give, McLyman says, then provides Apexx an insight into how they think and feel about money, and enables the firm to come up with a strategy designed around that behavior.

“When you know someone’s temperament, you will have a better idea of what products and services suits them, so behavioral analysis should be the first step that any financial advisor takes with his or her clients,” McLyman says.

In the aftermath of the crisis, many financial advisors are struggling to come up with strategies that will safeguard their clients from future dangers. Proper long-term planning, the right mix of investment products suited to risk appetite and fostering deep relationships with clients are all