Quantitative Analysis of Investor Behavior (QAIB)

What is QAIB?

DALBAR's 2015 Quantitative Analysis of Investor Behavior (QAIB) is the twenty-first annual edition of a report that examines the returns that investors actually realize and the behaviors that produce those returns.

Since 1994, DALBAR's QAIB has been measuring the effects of investor decisions to buy, sell and switch into and out of mutual funds over both short- and long-term time frames. The results consistently show that the average investor earns less - in many cases, much less - than mutual fund performance reports would suggest.

The goal of QAIB is to continue to improve the performance of independent investors on the one hand and of professional financial advisors on the other hand by incorporating the factors that influence behavior that determines the outcome of investment or savings strategies. QAIB offers guidance on how and where investor behaviors can be improved.

QAIB 2015 examines real investor returns in equity, fixed income and asset allocation funds. The analysis covers from January 1, 1985 to the period ending December 31, 2014, encompassing the crash of 1987, the drop at the turn of the millennium, the crash of 2008, plus the recovery periods of 2009, 2010 and 2012. This year’s report will focus on the worst periods of investor decision making over the last 30 years and the steps that can be taken to proactively correct behavior in stressful circumstances.

The report explains how investors and advisors adapt to changing market conditions and produce investor returns using investor behaviors, the psychological factors that drive them and the knowledge of how investment classes have acted in the past.

What does the Report Include?

  • Mitigating Money-Losing Behavior – A responsive approach to identifying when investors are most vulnerable to money-losing behavior.
  • Maximum Impact Events – The top 10 periods of time in which the average fund investor experienced the most acute underperformance.
  • Steps to Help Investors When They are Most Vulnerable – Strategies to employ when maximum impact events are identified.
  • Planning for Maximum Impact Events – Steps that can be taken now so that one is prepared to respond in stressful market situations.
  • What QAIB has Taught Us Through the Years – A look back at all that we have learned over the past 30 years about investor behavior.

CashMapper

What is CashMapper?

CashMapper is a computer based intelligent agent that conducts a financial needs assessment and directs users to pre-qualified services to meet their financial needs. Once CashMapper identifies the financial needs of each user, it proactively reaches out and obtains permission from the user to contact him/her, avoiding the hurdle of relying on the user to take action.

How does CashMapper work?

The CashMapper system is a behavior based intelligent agent that affords users privacy to reveal financial problems and makes recommendations that conform to the user’s preferences.

CashMapper uses a proactive communication to invite users to a confidential session that provides solutions to financial needs. Solutions are based on the employee’s financial priority and behavioral preference. Behavior preferences range from “Don’t call me, I’ll call” to “Make an appointment” or “Send materials”.

What are the Advantages that CashMapper affords? 

Personal Interview Features

The expert system of CashMapper emulates the relevant features of a personal interview but does so without the cost and time of a financial adviser. As a result millions of "personal interviews" can be done at extremely low cost, producing a highly valued benefit for the user and the providers of specialized services.

Reaching Out

CashMapper is built to reaching out to users instead of expecting users to help themselves. Behavioral finance studies show that the great majority of people will not act on their own but will when contacted and invited to participate by a trusted source. CashMapper primarily uses the employer as the trusted source to reach out to employees on a regular basis.

Privacy

CashMapper recognizes the need for privacy and confidentiality in discussing financial matters. This privacy is guaranteed until explicit permission is granted by the user to introduce a third party.

Scope

A key success factor in meeting users' financial needs is ensuring that the most important financial need is covered by the scope of what is being provided. CashMapper offers a broad scope for discussion to address the user's total financial needs and concerns (preferences, debts, cash flow, obligations, etc.) instead of focusing narrowly on) investments, insurance or other specific need.

The expert system technology avoids the problem of giving users too many complex choices that may not be understood or may not be applicable.

Permission

Obtaining employee's permission for specific contact or materials has proven to be a critical difference between most automated solutions and personal interviews. CashMapper obtains permission instead of making passive recommendations or offering or delivering generic packages.

Manageable Solutions

Another key success factor is providing manageable solutions that are within the scope of the employee to handle instead of answers that the employee finds impractical. The CashMapper solution is aligned with the receptivity of the user.

Computer Model Certification

What is DALBAR's Computer Model Certification Program?

DALBAR's Computer Model Certification provides firms that seek to comply with advice regulations for IRAs and 401(k) participants with the required credentials to comply with the regulations. Certificants receive a distinctive mark of quality in the form of the DALBAR Seal that differentiates the model from the hundreds of others that are non-compliant.

Detailed Fact Sheet

Implementing a Computer Model

Request for Proposal

What are the Benefits of Participation? 

Gives Certificants the ability to:

  • Leverage the DALBAR Rating in marketing and promotional materials.
  • Attract new clients.
  • Receive a report on the health of the existing client base and current satisfaction to ensure minimal attrition.

What are the Deliverables? 

  • Report of the analysis supporting the Certification
  • Certificate of Achievement
  • Pointers on how to best promote DALBAR Rating

What are the Prerequisites?

Financial Professional must:

  • Have a minimum of 5 years experience in the field of financial advice.
  • Be a full time financial professional with a minimum of 100 active clients and at least 25 clients with tenure of 5+ years.
  • Pass a background check.

What is the Certification Process?

The following steps are required to obtain the DALBAR rating:

  • Candidate completes application detailing qualifications and experience.
  • DALBAR conducts a background check of the regulatory record of the candidate to determine if the individual qualifies for certification in compliance with SEC rules.
  • DALBAR evaluates investment theory to determine if it is generally accepted
  • DALBAR reviews investment performance and fees for reasonableness
  • DALBAR tests the computer model using multiple scenarios for reasonableness and compliance with regulations.
  • Candidate provides DALBAR with a complete list of clients.
  • DALBAR verifies completeness and surveys a representative sample of clients to determine if ethical and quality standards have been met.
  • DALBAR issues certification.

What is the Timing and Cost?

Timing:
It depends on the scope and nature of the computer model.  Certifications are renewable annually.

Cost:
The cost for certification depends on the scope and nature of the computer model and the uses to which the model will be put.  Multiple versions are priced on request.

Detailed Fact Sheet

Implementing a Computer Model

Request for Proposal

Registered Fiduciary™ (RF™) Certification

What is the RF™ Certification?

The Registered Fiduciary™ (RF™) certification identifies financial professionals that have achieved pertinent academic qualifications and licenses, learned required practices, and have passed a background check.

The RF™ certification prepares a candidate to comply with the regulatory requirements of acting as a fiduciary under current laws. The RF™ certification is continuously being updated to reflect the most recent regulatory, marketplace and technology changes.

This fiduciary standard distinguishes RF™ designated professionals as having met the highest standard in the financial industry. All valid certified RF™ are listed on the Registry of Fiduciary Professionals. RF™ certifications are further defined by specialties. Each designee has one or more specialties that identify the services that he/she is qualified to provide. Specialties currently include:

  • RF™ – General Practitioner
    • RF™ – Financial Planner
    • RF™ – 401(k) Plan Adviser
    • RF™ – 401(k) Participant Adviser (Replaces designation in the FAN program
    • RF™ – IRA Specialist
    • RF™ – Wealth Manager
    • RF™ – Foundation/Endowment Adviser

RF™ Requirements 

  • Background Check
  • Academic & Licensing
  • Training
  • Testing
  • Complaints
  • Continuing Education
  • Annual Renewal

Authority to Issue RF Certification 

The Fiduciary Standards Board licenses training organizations to develop training and continuing education programs, as well as licensing certifying bodies. DALBAR, Inc. holds a license from the Fiduciary Standards Board as a training and certifying body, and has created the RF™ certification.

RF™ Support

DALBAR provides the following support to Registered Fiduciaries:

  • Promotion of RF Certification
  • Licensee and Designee Promotion
  • Public Access

What is the Timing and Cost?

The typical cost of an online course for one candidate is $800 to $1,000, with continuing education cost of $200 to $300 per year. An online course usually requires 10 to 12 hours of study time for the average candidate. The continuing education varies from two hours to five hours per year.

At the completion of training, candidates are eligible for certification to receive the RF™ certification. Certification involves completing an application that contains a number of disclosures and commitments to act as an RF™ designee. The information provided on the application is independently verified for completeness and accuracy. The candidate then schedules an examination for the selected specialty. Upon successful testing the candidate is awarded the RF™ certification. The cost of certification is $500 per candidate. The certification process requires approximately 30 days. 

Verified Expert™ (VE™) Certification

What is a Verified Expert™?

A Verified Expert™ is a financial professional who has been independently verified by DALBAR to be an expert in their field. The Verified Expert (VE™) certification is only awarded to professionals that are qualified to assist clients with specialized investment and insurance choices. The VE™ certification means that the professional:

  • Was examined and found to have the experience and knowledge to act as a trusted guide for his/her clients who are have a need for the products and services in which the professional has expertise.
  • Has had a recent background review (within the last year) and found to have a no history of regulatory or other infractions or activities that would concern his/her clients.
  • Has disclosed all potential conflicts of interest, fees and compensation, privacy policies, affiliations, material business interests and any other facts that are likely to influence a business relationship with the professional and found that there were no areas of significant concern.

The role of the Verified Expert™ is to provide guidance in the suitability and proper use of investment and insurance products and services to clients.

What are the Benefits of Becoming a Verified Expert™?

Benefits to Advisor

Verified Experts™ are able to use their credential and testimonials to attract and retain clients. VE™ Advisors also have access to the TRUSTIVO™ Platform to build your business amongst retirees and those nearing retirement. Specific Advisor deliverables include:

  • Personalized Credential document
  • Certificate of Achievement
  • Client feedback from evaluations performed
  • Access to the TRUSTIVO™ Platform

Benefits to Clients and Prospects

In addition the Advisor benefits, the VE™ certification provides your current and prospective clients something money can't buy, Peace of Mind. Specifically certification provides clients and prospects:

  • Protection from being misled by an unqualified person
  • Full disclosure about the professional
  • Independent oversight by DALBAR
  • Comfort of working with an experienced knowledgeable professional in the specific area of interest

How do I Become a Verified Expert™?

Verified Expert™ certifications are available for:

  • Retirement Income Experts
  • Financial Planners
  • Tax experts
  • Estate planners

The following are required in order to earn certification:

  • Academic & Licenses: Candidate must have the appropriate credentials for the specialties being applied for.
  • Qualification: Candidate must provide verifiable evidence of sufficient training or experience to provide specialty listed on page 2 of this application.
  • Background: Candidate’s background must be clear of serious offences or improprieties.

The process takes approximately 30 days to complete and costs $350 for a new certification and $250 for an annual renewal.

Registered Manager™ (RM™) Certification

What is the Registered Manager™ Certification?

The Registered Manager™ certification provides investment managers with a powerful combination of sales tool and compliance disclosures to satisfy the requirements of ERISA section 3(38). Certification enables investment managers to use client testimonials to advertise and attract new assets. 

What are the Benefits of Certification?

Becoming a Registered Manager™ gives you the ability to:

  • Use the client testimonials in marketing and promotional materials:
    • Trust – How many of your clients really trust your firm?
    • Results – How many believe their investments performed as expected?
    • Advice – How many respect the quality of investment advice from your firm?
    • Service – What percentage of your clients believe you deliver great service?
  • Support due diligence required by ERISA

What are the Deliverables? 

  • Personalized Credential document
  • Certificate of Achievement
  • Client feedback from evaluations performed

What are the Prerequisites?

Financial Professional must:

  • Have a minimum of 5 years experience in the field of financial advice.
    • Be a full time financial professional
    • Pass a background check.

What is the Certification Process?

The following steps are required to obtain the DALBAR rating:

  • Candidate completes application detailing qualifications and experience.
  • DALBAR conducts a background check of the regulatory record of the candidate to determine if the individual qualifies for certification in compliance with SEC rules.
  • DALBAR reviews the client agreement to determine if it services and terms are consistent with ERISA 3(38) and that document is understandable without bias against client.
  • DALBAR evaluates investment theory to determine if it is generally accepted.
  • DALBAR reviews due diligence and investment performance reports to determine if basic tool are available to perform as Registered Manager™.
  • Candidate provides DALBAR with a complete list of clients.
  • DALBAR verifies completeness and surveys a representative sample of clients to determine if ethical and quality standards have been met.
  • DALBAR issues certification.

What is the Timing and Cost?

Certifications take approximately 60 days. Certifications are renewable annually.

The cost for certification of the firm is $3,250 for the first time, plus $250 for each IAR. The cost to renew is $2,500.

For more information about DALBAR's Adviser Solutions and Certifications, please contact Cory Clark at 617.624.7156.