Birke brings together behavioral finance and smart technology to help advisors better serve clients.

A decade or so ago, Kol Birke, senior vice president of technology product evolution at Commonwealth Financial Network, attended an after-work class on how to unstick conversations that get stuck.  

Despite being the only financial professional in the room — all the other attendees were therapists — Birke had a keen interest in the subject matter because, he said, “so much of financial planning is about human relationships, conversations and complex interpersonal decision making.”

In his view, being able to “unstick” sticky conversations to enable people to talk freely is key to helping them make the best financial decisions.

With Commonwealth’s support, Birke entered a master’s program in positive psychology at the University of Pennsylvania.  The discipline is based on the premise of promoting positive mental health, Birke said, to allow an individual to flourish. Since completing his degree, Birke — who is a financial behavior specialist with Commonwealth’s Advanced Planning team — has parlayed his knowledge and insight into helping Commonwealth’s advisors “have good conversations with their clients to promote good financial behavior.”

Even the best of us are innately swayed toward taking the wrong kinds of financial decisions, decisions that result in bad financial behavior. Sometimes, we can get stuck where we shouldn’t get stuck: “I might have an advisor coming to me and saying. ‘I have a 70-year-old client who is spending too much money on her irresponsible son. How do I unstick her?” Birke said. Major events — a political crisis in a far-off country, for example — that have little or no bearing on our individual portfolio can cause us to panic and act irrationally. We might meet a friend who boasts about making double-digit returns and urge our advisor to invest in whatever asset class that might be, even though the investment might not be the best for our particular portfolio and situation.

Advisors need to constantly help their clients through these and other impasses. In Birke’s view, the best way they can do this is by getting to know their clients as intimately as possible to build and nurture a lasting relationship based on trust and openness.

The great enabler that is technology makes that process possible, Birke said.

He views technology as an amplifier, something that provides the fundamental bedrock for the proper functioning of the behaviorally-based approach to financial planning that is Commonwealth’s.

“When technology is well-designed, it is perfectly consistent,” Birke said. “A well-designed alarm clock, for instance, will wake you at same time every day. It is perfectly rational, it doesn’t make emotional decisions, and it is instantaneous and tireless.”

Marrying technology and behavior in an optimal way acquiesces to human fallibility and creates a positive framework around it.

“We don’t let that fallibility bother us — we create a world around it,” Birke explained.

He gave the example of texting while driving, something that’s extremely dangerous but that people the world over continue to do despite education, warnings and penalties.

“The solution the car companies have to come up with […] is to design cars that can drive themselves,” he said. “In the same way, we could design a client portal that, when they dial in, shows them how bad the market is doing and that will then prompt them to make [the right] decisions. Or, we could show them through technology that even though the market is bad, it will recover; we can do that by coming up with solutions and visuals that will prompt positive behavior.”

Commonwealth places a lot of importance on designing these kinds of positive solutions. The firm also believes in making behaviorally informed technology that is easy for advisors to use. Commonwealth takes great care when selecting its tech staff, Birke said. Around 15 members of the tech team (himself included) are “certified usability analysts” whose expertise lies in developing technology solutions that are suited to the way in which people use computers.  

That means thinking in the “Apple way,” Birke said, and keeping things as simple and user-friendly as possible so that advisors don’t waste time and energy trying to figure out complicated software and applications, but can funnel their energy and efforts into client relationships.

Smart technology solutions also allow advisors to “outsource” such duties as rebalancing a portfolio — duties that are an important part of an advisor’s job, Birke said, but that take up valuable time and can just as easily be programmed into a machine.

“This way, we reallocate advisor time to things that computers are not good at, such as human wisdom and empathy,” Birke said.

— See the full 2016 IA 25 in the May issue of Investment Advisor, and find ongoing coverage of the honorees, including extended profiles, all month on the IA 25 homepage.