Applying Neuroscience to Financial Planning Practice: A Framework and Review
53 Pages Posted: 7 Dec 2011
Date Written: December 6, 2011
This paper presents findings from neuroscience, neuro-finance, neuro-economics, behavioral finance, and behavioral economics in the context of a two-system model of human decision-making, labeled as the “rider” and the “elephant”. The rational “rider” system is characterized by overconfidence and deficiencies in speed and endurance. The emotional “elephant” system is characterized by time preference myopia, emotional marker processing, and loss aversion. Application of this neural model of financial decision-making results in a variety of effective and practical suggestions for financial planners.
Keywords: neuroeconomics, decision-making, neurofinance, fmri, brain science, financial planning
JEL Classification: D11, D00, C91, C92
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