Insight: Can Financial Professionals Help Clients Learn Better from the Outcomes of Past Decisions?

By Kremena Bachmann

Insight Overview


Financial professionals can help clients understand that financial advice, even when it is good advice, can result in bad outcomes. But a financial decision that a client makes after consulting with a professional can result in a strong emotional reaction if the decision results in losses; that reaction that can be even stronger than if the client had made the decision without advice. If clients experience loss from an investment after receiving advice from a financial professional, it is not enough for the professional to explain why the advice is nevertheless valid. Doing so improves clients’ understanding that good advice may have bad outcomes, but it will not necessarily encourage clients to keep following good advice even after losses. To help clients avoid changing their decisions for no good reason, financial professional should consider the emotional aspects of clients’ decisions, which may be related to what clients have expected from following the advice.

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About the Author

Dr. Kremena Bachmann is a behavioral scientist at the University of Zurich and at the Zurich University of Applied Sciences. She studies how psychological effects influence individual decision behavior. Her research focus is on designing measures that can help individuals make better financial decisions for themselves.

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