15 June 2023 |

6 Lessons On How To Scale Behavioral Finance With ‘BeFi Guy’ Dr. Daniel Crosby


Behavioral finance is only recently getting the widespread traction that it deserves. 

And our industry’s leading ‘BeFi Guy’, Dr. Daniel Crosby, couldn’t be more excited about where these winds of overdue change are blowing the fintech space.

But before we dive into all that, here’s what he had to say on the Humans of Fintech podcast

Let’s cover a little background on the man, the myth, the legend, and where it all began for Daniel. 

Daniel is a psychologist, behavioral finance expert, and the industry’s first Chief Behavioral Finance Officer leading the way with Orion Advisor Solutions. 

He is a New York Times bestselling author (2x), with his first book Personal Benchmark: Integrating Behavioral Finance and Investment Management, and his second book, The Laws of Wealth. 

And also a friend and tremendous inspiration to me, and the entire Fintech Is Femme ecosystem. 

For those of you thinking he has the coolest job ever, you might be right

But how does one become a behavioral finance psychologist in a world that…well, frankly, didn’t even really believe that was a thing?

For Daniel, the road to success and defining a new category within the profession was (as it usually is for most highly successful people) anything but linear. 

A year after beginning college at Brigham Young University, Daniel left for a mission with his church to the Philippines

The trip profoundly impacted him, causing him to return to the States with his heart set on service and a desire to help others. 

When he came home, he also learned that a close female friend had fallen into a severe battle with an eating disorder. 

Before leaving, Daniel thought he would follow in his father’s footsteps and become a financial advisor. 

These two experiences impacted him greatly, causing him to shift focus when he went back to school and pursue a path of becoming a clinical psychologist instead. 

As soon as he finished his undergraduate, Daniel immediately started a Ph.D. program three days after graduation, specifically helping women overcome eating disorders. 

However, three years into the program, in his words, he “just absolutely fell apart.” 

He was seeing 30-40 clients per week as a 23-year-old professional, many of whom were having the worst days of their lives, were reliving horrific traumas with him, and in some cases was court-ordered to see him and not exactly thrilled to be there. 

Though he finished his Ph.D. program, afterward, he was no longer sure this was the road he needed to be on. 

So, Daniel went back to his dad and asked for his advice. 

He loved studying humans and human behavior but wanted to find a way to be in service that didn’t require him to do so in a medical/clinical context. 

His dad then pointed out that there was a ton of psychology in his work in the financial services industry and wondered out loud if there could be an opportunity for him there. 

And though Daniel’s initial reaction was, “What are you talking about?” that comment put him on a path to discovering behavioral economics and eventually becoming an intermediary for people like his father. 

A translator of human behavior for advisors. 

Daniel knew what he wanted to do, but the industry still needed more time to prepare for him. 

He finished his Ph.D. at the start of the Great Financial Crisis and began feverishly applying for different roles at the intersection of behavioral science and business, only to be turned away repeatedly because his experience was seen as too clinical. 

Until he met someone that wasn’t so different from himself. 

Finally, he found a consultancy in Atlanta owned by a gentleman who was a clinician himself and had transferred to the business world. 

He saw a bit of himself in Daniel and was expansive enough in his thinking to give him a shot (to which the entire industry owes a massive thank you!) 

Though he only stayed in the role for 18 months, he quickly realized that he could do the same type of consulting work independently and began approaching other financial firms and institutions to help them with their behavioral economic problems

Though it took a while to get the ball rolling, as people were still warming up to the notion that this was a legitimate part of financial services, Daniel once again found his footing. 

He went from President of IncBlot Behavioral Finance, an Atlanta-based firm, to Chief Behavioral Officer at Brinker Capital. 

And when Orion Advisor Solutions acquired Brinker Capital, Daniel kept his title for the great benefit of the team at Orion and the industry as a whole. 

Only some people truly live up to the term thought leader, and Daniel is precisely that. 

He has been a pioneer in bringing behavioral science and psychology into financial services for over 15 years

Beyond writing two NYT bestselling books, he also constructed the “Irrationality Index,” a sentiment measure that gauges greed and fear in the marketplace from month to month.

You can find his ideas in publications like the Huffington Post and Risk Management Magazine, as well as his monthly columns for WealthManagement.com and Investment News. 

Daniel was also named one of the “12 Thinkers to Watch” by Monster.com and a “Financial Blogger You Should Be Reading” by AARP. 

He can be seen speaking on the stages of all of the industry’s best conferences, from Future Proof to Orion’s Ascent, and has done multiple Ted Talks with tens of thousands of views. 

Recently, I had the great pleasure of hosting Daniel on my podcast. In our conversation, we dove deep into where behavioral finance and fintech meet and how the industry is already working to elevate ‘the human element.’ 

Let’s dive into some of the highlights. 

1. WTF is BeFi?

I asked Daniel to define for those that don’t know, in simple terms, what behavioral finance is. 

He says, “Behavioral finance is finance that accounts for the messiness of human beings.” 

Most models are built on two conditions: 

  1. People are going to make decisions that maximize their wealth 
  2. People are going to make decisions that are in their own best interest

The problem? “It’s 1:30 pm, and I’ve already made ten decisions that defy those two conditions.” 

He goes on to say, “What we know about human behavior is that we shouldn’t be building our systems and tech based on this pie-in-the-sky notion of who we are as people and how we act. 

We should get down in the grit and the dirt and look at the crazy, wild world of humanity and build tech and systems that account for that.” 

Because we as people don’t abide by the two conditions above, we illogically work against ourselves. All. The. Damn. Time. 

This means our systems must stop playing dumb and treat investors like people, not formulas.

2. Behavioral Finance must be embedded 

While 83% of advisors say emotion management is the most important part of financial advice, only 6% of clients say the same. 

Clients want the outcomes driven by behavioral finance, but like hell do they want to outright admit they are human and possibly the problem?

So, BeFi has to be embedded into the process by financial services providers, being extra mindful of the language used to still make the client feel like they are winning in the process. 

3. It’s the little things, not the big things

In my work, I often get asked about various fintech companies and their BIG COMPANY PLANS, but Daniel and I agree that it’s the day-to-day actions, the small changes that you can really put in front of the user that drive the most change. 

The big strategy is the accumulation of all the little things

For example, I heard one of Daniel’s talks last year when he spoke about how labeling an emergency vault something fun will mean that it will be more fruitful, exciting and motivating. 

So, I put that theory to the test. I made a new savings fund and labeled it a “vacation fund.” 

And that shit worked. Hello, hi, it’s me, just back from a month in India. 

Another corporate example Daniel brought up to further the point on the importance of small things was Netflix adding its ‘Next Episode’ button. 

As soon as they did that, there was a 70% increase in viewer behavior. “Imagine the impact on their business.”

And all it took was adding that little button

Similarly, the process of auto-enrolling and auto-escalating retirees into retirement accounts has led to tens of billions of dollars in extra savings. 

Relatively small change = huge impact. 

4. Bringing it back to the fundamentals 

Though this shift is relatively recent, the industry is looking more and more for ways to bring our humanity back into the day-to-day of business for all parties. 

In Daniel’s words, “Part of bringing ourselves back to the fundamentals is [the understanding] that the human being is the foundation of every enterprise.” 

Behavioral Finance is not some peripheral ‘nice to have’ thing; it is in every way essential because it speaks to the core of who each one of us is and aspires to be.

5. Flipping the narrative

The American Psychological Association’s most recent study stated that the top three worries in people’s lives (in order) are money, the economy, and work. 

AKA: Money, where you spend your money, how you make your money.

However, most of us all act like we’re okay, despite the data showing we are clearly not.

Understanding ourselves psychologically and how our human behaviors interact with money offers an opportunity to flip the script

*Everyone* benefits from understanding themselves psychologically in terms of their money behavior, not just the ‘broken’ people or the people who identify with money problems.

6. No matter what you’re going through, someone else has been there too

Daniel shares how being a therapist not only helped him to be more compassionate with others but it also helped him to turn that empathy inward onto himself. 

From that experience, he wants people to know that “Whatever your failings, whatever your desires/wants/wishes–you’re not that strange. 

Whatever you’ve been through, whatever you’re going through, we are all a mess, and we’re all faking it and doing the best we can.”  

In part, this is exactly why Fintech Is Femme and Humans of Fintech exist. 

Because with podcasts like mine and Daniel’s podcast Standard Deviations, we are normalizing these experiences for people and giving them a way that is free of shame and judgment. 

Through these conversations, we can help drive technology to make as many people’s lives better as possible, and I honestly couldn’t think of a better use of my time.