Behavioral Biases
Predicting Behavioral Biases with Behavioral Finance:
The reality is, all of us aren’t a perfect human being, we have a set of biases that drive our decision-making that can lead to less than optimal outcomes. Based on our research, we focus on 16 biases and recommend that advisors and investors understand their top biases and how they form their decision-making patterns.
Financial Behavioral Biases are deep-rooted patterns of investor behaviors which, if not managed, can cause a client to make irrational decisions on a regular basis. A Vanguard study found that financial advisors bring 150 bps of value by coaching investor clients to manage these behaviors.
To make this easy for financial advisors, Financial DNA measures each of these behavioral biases independently and displays them in the Behavioral Management Guide report. Financial advisors should discuss the strongest biases with the client and agree on a strategy for managing them.
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The best way to experience DNA, is to try it yourself. Can Financial DNA pinpoint your biases?
The 16-Behavioral Biases Measured with Financial DNA:
- Overconfidence
- Loss aversion
- Optimism bias
- Newness bias
- Fear of regret
- Benchmark focus
- Pattern bias
- Controlling
- Herd follower
- Mental accounting
- Consolidated view
- Over trading
- Disposition effect
- Status quo bias
- Risk aversion
- Instinctive
