The opinions expressed in this presentation are those of the speaker. The International Society and International Foundation disclaim responsibility for views expressed and statements made by the program speakers.

Ethical Behavioral Finance:Not an Oxymoron for Retirement and Health Plans

Rick Storms, CEBSClient Services ManagerAlerusArden Hills, Minnesota

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For those so inclined, please download this App to your phone:

See important disclosures on the final page of this presentation.

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Behavioral Finance:

What Is behavioral finance are there Ethical considerations

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PEOPLE

See important disclosures on the final page of this presentation.

Behavioral Finance is about . . .

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See important disclosures on the final page of this presentation.

PEOPLE CONCEPTS

Behavioral Finance is about . . .

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Combines psychology with economics and looks at how emotional, social, and cognitive factors influence everyday decisions including financial ones.

Behavioral Finance: A Definition

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Status Quo/Subscription Bias

Choice Overload

Framing

Loss Aversion

Endorsement Effect

Immediacy Effect

Procrastination

Confirmation Bias

Social Norms

Heuristic Effect

Dramatic Effect

Present Bias

Serial Position Effect

Completion Effect

Story Telling

Other

See important disclosures on the final page of this presentation.

Behavioral Finance: Human Biases

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See important disclosures on the final page of this presentation.

Behavioral Finance is about . . .

PEOPLE CONCEPTS

ACTION

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Behavioral Finance

See important disclosures on the final page of this presentation.

An Absurdity Bias Example . . .

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Status Quo/Subscription Bias

Choice Overload

Framing

Loss Aversion

Endorsement Effect

Immediacy Effect

Procrastination

Confirmation Bias

Social Norms

Contagion heuristic

Dramatic Effect/ Absurdity Bias

Present Bias

Serial Position Effect

Completion Effect

Story Telling

Other

See important disclosures on the final page of this presentation.

Health and Welfare Behavioral Biases

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Dr. Volpp, University of Pennsylvania Smoking Study

Auto-Enrollment (Defaults)

Apps

Source: Dr. Dhruv Khullar, 2017See important disclosures on the final page of this presentation.

How Behavioral Finance Can Help Health

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Are You a Digital Fiduciary? Digital Resources Impact Decision Making Blank lines on a retirement plan website shape a participant’s

level of diversification.

Enhancing the design of an enrollment website can increase the number of workers who personalize their enrollment by 15% and can increase overall contributions by 10%.

Online enrollments give employers an opportunity to set higher default rates without reducing enrollment.

Source: Voya Behavioral Finance Institute for Innovation, 2019See important disclosures on the final page of this presentation.

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The Digital Fiduciary: What Do You Do?

Establish a Digital Policy Statement

Make The Right Thing Easy

Test and Retest

Source: Voya Behavioral Finance Institute for Innovation, 2019See important disclosures on the final page of this presentation.

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Behavioral Finance

See important disclosures on the final page of this presentation.

A Loss Aversion Example . . .

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For those so inclined, please download this App to your phone:

See important disclosures on the final page of this presentation.

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Cost of Waiting Example for the Procrastinator:

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Behavioral Finance

See important disclosures on the final page of this presentation.

A Story Telling Example . . .

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See important disclosures on the final page of this presentation.

Behavioral Finance is about . . .

PEOPLE CONCEPTS

ACTION

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See important disclosures on the final page of this presentation.

Behavioral Finance is about . . .

PEOPLE CONCEPTS

ACTION ETHICS

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What Are Ethics?What is Trust?

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Defining Things Like Ethics, Trust, Moral Character, Etc., Is Not Easy . . .

So let’s look at a couple of definitions…

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What is Trust?

“Trust is a psychological state comprising the intention to accept vulnerability on positive expectations of the intentions of another”-Rousseau

Shaped by the characteristics of the trustor, trustee, and situation.*

Trust can be intrapersonal, interpersonal, institutional, or societal.*

Trustworthiness is based on perceptions of both competence and character.*

*Source: Brinsfield, University of St. Thomas, 2017 See important disclosures on the final page of this presentation.

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Ethics Definitions

Moral principles or rules of conduct recognized by an individual or group of individuals.

Rules of conduct that apply when an individual has to make a decision regarding moral principles.

The process of determining what are, and what are not, reasonable standards of moral conduct.

A process of resolving actual or potential conflicts of interest.

Source: Brinsfield, University of St. Thomas, 2017 See important disclosures on the final page of this presentation.

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Discussion scenarios

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Ethical Concerns With Behavioral Finance

Are there elements of Behavioral Finance that cause Ethicalconcerns for you?

Auto enrollment impact on lower paid people

Choice overload on retirement funds

Portfolio shifts within Target Date Funds

Loan features on retirement plans

Default elections on retirement plans

See important disclosures on the final page of this presentation.

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Ethical Concerns With Behavioral Finance

Are there elements of Behavioral Finance that cause Ethicalconcerns for you?

Selective Framing of choices on Medical Plans

Wellness incentive disparities

Prescription drug issues

Default elections on medical plans

Choice overload with Voluntary Benefits

See important disclosures on the final page of this presentation.

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Discussion/Q&A

See important disclosures on the final page of this presentation.

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See important disclosures on the final page of this presentation.

Behavioral Finance is about . . .

PEOPLE CONCEPTS

ACTION ETHICS

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Thank you for attending!

WE WILL ALWAYS ACT IN THE BEST INTEREST OF OUR CUSTOMERS BY PROVIDING INNOVATIVE AND COMPREHENSIVE SOLUTIONS THAT ARE DELIVERED THROUGH RELATIONSHIP-ORIENTATED CONTACTS AND SUPPORTED BY USER-FRIENDLY TECHNOLOGY.

ALERUS RETIREMENT AND BENEFITS

Rick Storms, CEBS

This material is provided for informational and discussion purposes only. Trust and investment services are offered through Alerus Financial, N.A., which does not offer legal or tax advice. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues. Statements of fact are from sources considered reliable but no representation or warranty is made as to their completeness or accuracy. All material is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. The opinions presented in this communication are subject to change without notice.

Investment products: 1) are not FDIC insured 2) are not deposits or obligations of a bank and 3) involve investment risk, including possible loss of the principal amount invested.

© Richard Storms, 2019

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