Chapter 16: Financial Advisory Services
Financial Behavior: Players, Services, Products, and Markets. H. Kent Baker, Greg Filbeck, and Victor Ricciardi, editors, 285-301, New York, NY: Oxford University Press, 2017.
Posted: 9 Jun 2017 Last revised: 20 Jul 2017
Date Written: June 1, 2017
Evidence from the behavioral sciences, notably economics and psychology, has profoundly changed the way policymakers and practitioners present expert advice to consumers. This chapter examines the behavioral science evidence on financial advice and explores its implications for the financial advisory profession. It explains how consumers of retail financial advice respond to certain aspects of the advice in predictable ways, sometimes exhibiting behavioral biases or following certain conventions in their decision making. By recognizing and anticipating these responses, financial advisors can offer a more complete service, offering benefits beyond the strictly financial return. But the behavioral needs of consumers may also provide advisors with incentives that are not strictly aligned with their clients’ financial interests. Finally, the increasing role of technology will play an important role in shaping the financial advisory services of the future.
Keywords: behavioral finance, behavioural finance, financial advice, behavioral science, bias, decision making
JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41
Suggested Citation: Suggested Citation