Applied Behavioral Economics Knowledge Circle: Smart People Doing Stupid Things: Decision Making Biases of Both Clients and Their Advisors

5 (1 vote)

Financial advisors know that their clients often make investment decisions that may not be purely rational. But because both are human, those advisors are subject to the same cognitive and psychological biases, and irrational decisions as their clients. However, because of their professional training and status, advisors may believe they are immune from irrational biases. This Knowledge Circle explores the tendency for advisors to project rational objectivity while unknowingly operating in conflict with that projection. In addition, we focus on 3 major biases affecting both the advisor and client and prescribe strategies for mitigating their powerful and destructive effects.

Get a reality check. They too are constrained by their decision making biases.
Focus on 3 main Behavioral Finance biases affecting them and their clients: Confirmation bias, Overconfidence, and Loss Aversion.
Learn strategies for mitigating the effects of these specific biases, and cognitive biases in general.
Receive a list of references for further study.

Lyle Sussman

Dr. Lyle Sussman is the former Chairman and Professor of Management and Entrepreneurship, University of Louisville, and Professor Emeritus. He previously taught at the University of Michigan and the University of Pittsburgh. Aside from 65 scholarly articles, he is a bestselling business author with more than 1,000,000 copies of his books in print in 15 languages. Excerpts of his books have appeared in Harvard Business Review Updates, Savvy, Bottom Line Reports, Working Woman, Inc., Success, Executive Book Summaries, Investor’s Daily, CNN, American Banker, US Air In Flight Audio, and hundreds of management blogs. He has spoken to more than 100,000 people and consulted around the world for both the private and public sector, with significant impact in the banking industry. He received his PhD from Purdue University, and his BS and MS degrees from University of Wisconsin-Milwaukee. He was selected for Who’s Who in Business Higher Education (Academic Keys).

David Dubofsky, PhD, CFA®

Dr. David Dubofsky has published over 40 articles in journals including Journal of Finance, Journal of Financial and Quantitative Analysis and Journal of Money, Credit and Banking. He is the author of Derivatives: Valuation and Risk Management (co-authored with Tom Miller), and Options and Financial Futures: Valuation and Uses. Prior to retiring in 2020, Dr. Dubofsky held faculty and administrative positions at TCU Neeley School of Business, the University of Louisville, Texas A&M University, Virginia Commonwealth University and Seattle University. Previously, he was a visiting academic scholar for the Office of Economic Analysis at the U.S. Securities and Exchange Commission and worked for Nalco Chemical Company and Standard Oil of Indiana. He earned his PhD in Finance from the University of Washington, MBA from the University of Houston, and BE in Chemical Engineering from City College of New York. He is a CFA® charterholder.