What the Hell is an Outsourced Chief Behavioral Officer?

Good question, and let’s tackle the core issue first: What’s a Chief Behavioral Officer (CBO)? Simply put, it’s someone in an organization who oversees the quality of decision-making in service to fulfilling the group’s mission. Matters of better decisions, stronger habits, and ultimately higher wellbeing for both external and internal constituents (customers and employees) are in the purview of a CBO.

The role is many things: expansive, new-on-the-scene, hard-to-define, and potentially transformational for people’s lives.

Let’s take a step back, set the table for how we got here, and then dive into some particulars, especially for the world of financial advice.

We start with a problem, and a complex and fascinating one at that: At this moment, humans have never been beset with more information, more choices, more noise. “Decision fatigue” is real. We’re collectively on tilt, with abundant global evidence on stress and anxiety to prove the point.

At the same time, we are living in the golden age of behavioral science. Across psychology, neuroscience, and other disciplines, we now understand what makes us who we are in a way we didn’t even a generation ago. How do we consume and process information? Where do habits, good or bad, come from? What’s an emotion and what role does it play in our daily lives? How do we think about our “future selves” in order to avoid regret? For these questions, and countless others, we have more evidence-based answers than ever before.

Connecting the modern challenge of making better decisions with leading-edge research, as well as timeless wisdom on a life well-lived, falls squarely into the lap of a CBO.

The relevance of all this for sound financial planning jumps off the page. The modern advice firm does much more than sell stocks and bonds and build basic portfolios. It takes a comprehensive approach to aligning the many dimensions of money life–not just investing, but spending, saving, protecting, borrowing, earning, and giving–with financial success and peace of mind, however one defines that. Behavior is everything. It’s not just a “tool” that one deploys; it’s a force, like gravity, that weighs on every step of the planning process.

How many firms are going to actually hire a CBO? The answer is very few, although we see wirehouses and some large platforms experiment with the role (often under different titles). At the same, how many competitive firms value achieving better decisions, habits, and wellbeing? Basically all of them.

Hence the one word we’ve not addressed yet: Outsourced. The whole idea behind an Outsourced Chief Behavioral Officer (OCBO) is that outside experts in behavioral science can deliver resources and guidance on the psychology of financial planning. It’s possible to achieve this away from the daily fray (and politics) and without a substantial semi-permanent investment in resources. An OCBO can inspire:

• A better understanding of client behavior: What makes our clients tick? What’s the best way to serve them? Well beyond tired “risk tolerance questionnaires” (which are often just performative exercises with no impact on actual advice), advisors can use modern methods to truly understand the human beings they serve. If customized advice is the future of the industry, a well-equipped CBO will be critical.
• Developing better financial advisors. Advisors are people, too, and “human centric” advice starts with those providing it. An expansive view of behavioral finance transcends decision-making and engages matters of emotional intelligence, which are critical for well-executed financial planning. So-called “soft” skills are actually the hardest to obtain and grow. There are also countless behavioral strategies that advisors can use to drive better career and client outcomes, if trained properly.
• A stronger organizational culture. Away from any one individual, applied behavioral insights can help improve the focus and effectiveness of an entire advisory culture. What is “human centric” advice? It’s advice that builds a process around what makes us who we are, including perception, emotion, decision, habit, and wellbeing. 
• More competitive, more profitable firms. Many traditional planning functions are growing commoditized; to the previous point, the creation and upgrading of cultures that deliver advice so valuable it won’t be competed away or undermined by ChatGPT. Any organization that thoughtfully invests in its people and its clients is likely to achieve higher employee wellbeing which naturally translates into better client experiences which in turn drive more referrals, higher wallet share, and stronger revenues.

A host of other communication, training, product, and compliance benefits also accrue to the presence of a CBO, outsourced or not. 

As I see it in working with firms throughout the world on all-things-behavior, this is a revolution in the making and it’s just picking up steam. When we at Shaping Wealth invented the OCBO category last year in 2022, we were faced by some blank stares (and this article’s eponymous question). That’s still true, but less so. If anything, revolutions take time.

And the next phase of the revolution starts today. I’m excited to let you all know that we’ve officially launched free access to select Outsourced Chief Behavioral Officer (OCBO) resources.

OCBO, our always-on digital advisor engagement platform, offers a steady flow of weekly, monthly, and quarterly behavioral insights and tools that are easy-to-understand and easy-to-share, delivering hundreds of practical, impactful, and original pieces of content each year through a beautiful proprietary dashboard.

If you’d like to learn more about how to get free access to OCBO, click here. You can also sign up to see a demo of the full OCBO platform during our webinar on July 12, 2023 at 12:00 p.m. ET.