Description
Financial professionals routinely encounter cognitive biases and mental shortcuts with clients. Research by Kahneman & Tversky (2013) demonstrates how these heuristics can lead to suboptimal financial outcomes. Baker & Ricciardi (2014) found that advisor awareness of behavioral biases significantly improves client outcomes. Yet, heuristics and biases can be helpful, too. Professionals must also recognize their own biases which can compromise objective guidance.
This session examines client psychology, focusing on cognitive biases such as confirmation bias, anchoring, loss aversion, and overconfidence, as well as lesser-known biases like the disposition effect, familiarity bias, and self-attribution bias. In addition, this session will address how these psychological factors influence financial decisions, both in a positive and suboptimal way, and present strategies for addressing biases with active communication techniques. By understanding behavioral finance principles, professionals will develop a deeper awareness of cognitive influences on financial decision-making and learn strategies for more objective, client-centered advising.
Learning Objectives
This session addresses several key CFP® Certification Learning Objectives by focusing on client and planner attitudes, cognitive biases, and behavioral finance concepts. It explores how client psychology and heuristics impact financial decision-making and outcomes. Additionally, it highlights the importance of effective communication and counseling techniques in managing biases, enhancing objectivity, and fostering client-centered advising.