Over the past several months, the industry has experienced growth in advisor tools and resources that help them leverage insights from the academic field of behavioral economics, and the trend isn’t likely to slow down anytime soon. In fact, as the roller coaster of investor emotion continues, the popularity of behavioral economic research and development of tools is likely to surge through the end of 2018 and beyond. This relatively new approach to managing investor emotion is gaining in popularity due to the obvious fact that humans are emotional and often struggle to make decisions that will impact their economic future.
The awareness of human fallibility is not new to financial advisors, but the emergence of science-based resources that can be used in practice is new. I emphasize “science-based” as there are several gimmicky behavioral finance resources that purport to be useful but fail to stand up to the rigor of scientific methodologies. In contrast, notable examples of quality, science-based efforts include Morningstar’s investment in their behavioral science team and Kaplan University’s collaboration with Think2Perform.
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