Behavioral Finance Article Published by Kitces

Michael Kitces asked me to write a guest blog on the topic of behavioral finance. Writing for Michael is not easy and there was no promise it would be published – he has very high standards. I put a lot of thought and energy into it and they ended up publishing it.

I include some of the executive summary below, written by the Kitces team, and a link to read the entire article on Kitces.com.

I hope you enjoy!

JAY
 

EXECUTIVE SUMMARY

The study of behavioral finance has significantly enhanced our understanding of real-world financial behaviors, and (in the process) has given advisors insight into the underlying behavioral biases that cause clients to make not-always-rational decisions. Yet while examining the irrational behavior of individuals in the context of personal finance, behavioral finance focuses mainly on how individuals behave but doesn’t always do a great job explaining why they make the choices and have the biases that they do, nor in particular what financial advisors should actually do about those behaviors. Thus, while academic research on behavioral finance has imparted value to the financial planning industry, it still has a tendency to fall short when it comes to providing effective, practicable applications that advisors can bring back to their firms.

In this guest post, Jay Mooreland – Founder of The Behavioral Finance Network in Saint Paul, Minnesota – examines the challenges financial advisors face in actually implementing behavioral finance concepts effectively with their clients, and how advisors can instead use behavioral coaching not only to help clients stick to their plan but also as a way to differentiate themselves from other advisors…