Behavioral Finance 2020 - PDF document

1 Behavioral Finance 2020 Executive Summar
Behavioral Finance 2020 Executive Summary MethodologyCharles S Key Points •••• What is Behavioral Finance?Behavi ? 3 markets have regained almost the of disconcerting losses. Even in the best of times, it can be and market reactions that have left even the most self-assured market investors overcome their emotional by increased uncertainty in the them navigate these challenges. Overcoming Investors’ B

2 iases in a Crucible goals through inves
iases in a Crucible goals through investing can easily control their situations, investors environment feeding these hit, suddenly millions of investors, and their friends and relatives, behavioral biases advisors observe the most-commonly observed behavioral biases. Clients are been concerned about the recent 71%58%81%62%Client communicationPortfolio construction 2019 2020 10-point increase YOYADVISORS’ BEHAVIORAL ADVICE

3 IMPLEMENTATION, 2019 VS. 2020 EXHIBIT 1
IMPLEMENTATION, 2019 VS. 2020 EXHIBIT 1 4 can be. consider each of the various least a treatment that reduces the and better managing client to strengthen communication instinctual adverse reactions during clients focused on their strategic than being distracted by outcomes is by leveraging the using mental accounting, an advisor investors to accumulate more shares of their favorite stock or Bias Description among clients Fra

4 mingAnchoringHerdingSelective memoryAvai
mingAnchoringHerdingSelective memoryAvailability biasBasing decisions only on readily available informationSelf-controlCLIENTS’ BEHAVIORAL BIASES, 2019 VS. 2020 EXHIBIT 2 5 Growing the Base market volatility, the demand advice increases substantially. sourced from other advisors investors seeking to consolidate clients referring friends and family to the conversion of formerly self-largely attributable to movements of the ma

5 rket overall. they tend to blame the inc
rket overall. they tend to blame the incumbent 2019 2020 30%Increased assets or walletshareHad no major impact or benetAttracted new clients due to dierentiated value-add programProvided highly customized service oeringHelped clients achieve better investment outcomesHelped improve clients nancial decisions and prioritize goalsDeveloped better understanding of clients comfort levels with riskReduced short-ter

6 m or emotional decision making (e.g., cl
m or emotional decision making (e.g., client were less anxious)Better managed client expectations through eective communicationStrengthened trust and relationship with clients/increased client retentionKept clients invested during market volatility (e.g. stuck with long-term plan)3%9%13%36%49%20%40%45%50%5%8%9%10%10%27%33%37%40%48%55% ADVISORS’ BENEFITS OF INCORPORATING BEHAVIORAL FINANCE, 2019 VS. 2020 EXHIBIT 3- 6 exp

7 ectations and remaining invested EXHIBI
ectations and remaining invested EXHIBIT 5CLIENT ACQUISITION IN ADVERSITY, Q2 2020 EXHIBIT 4 78%51 pp increas27% Text messages 30 pp increas 72%42% Outgoing calls Non-User Behavioral Finance User 29 pp increas 66%37% Emails 18 pp increas 62%44% Video meetings Gained clients Neither added or lost clients signicantly Lost clients 30 pp increase Behavioral Finance User 66322% Non-User 36576% 7 non-users. their client engagemen

8 t strategy. touting their investment ret
t strategy. touting their investment returns to frame current conditions as and discussed. advisors are taking the time to truly that their advisor is ready to listen. 7 The Evolving Role of Behavioral Finance 2020 Conclusion Staying active in times of volatility is key to adding clients many times the best advice is to try and take emotion out The Evolving Role of Behavioral Finance 2020 The Evolving Role of Behavioral Finan