Every human being is driven by emotions – more than we would like to admit – and inherent patterns of behaviour should not be overlooked in the advice process.
Today, with the enormous number of people responsible for their own retirement planning, understanding the emotions that drive investment decisions has never been so important.
At its core, Behavioural Investing brings together the influences of sociology, psychology, and finance to better understand the process of investment decision making. It recognises that investors, as all human beings can be, are not always rational, have limits to their self-control, and are often influenced by biases, whether markets are buoyant or in downturn.
By better understanding the practical applications of Behavioural Investing, advisers can help investors make more informed choices, avoid common behavioural pitfalls, and match them to suitable investments, based on their financial personalities and their current financial situation.
By also being more psychologically in tune with investors and having a deeper understanding of their individual behavioural biases, advisers can also build even stronger relationships with investors and better direct them towards achieving their financial goals.