Chapter 28: Applications of Client Behavior: A Practitioner's Perspective
Financial Behavior: Players, Services, Products, and Markets. H. Kent Baker, Greg Filbeck, and Victor Ricciardi, editors, 523-541, New York, NY: Oxford University Press, 2017.
Posted: 14 Jun 2017
Date Written: June 1, 2017
This chapter reviews various behavioral concepts and strategies to help clients avoid behavioral errors, with the result of increasing the probability of a successful plan design and implementation. The chapter discusses how the concepts introduced by research in behavioral finance have become integrated throughout Evensky & Katz/Foldes Financial’s practice. The chapter begins with framing for new clients, which is part of the firm’s approach to retirement planning called “anchoring on the efficient frontier.” Anchoring refers to the intersection of the client’s return requirement as determined by a capital needs analysis and the client’s risk tolerance. Framing is introduced as a powerful behavioral management tool for the practitioner. Behavioral finance lessons are integrated in the risk tolerance and return discussions, as well as the reporting process.
Keywords: behavioral finance, behavioural finance, efficient frontier, anchoring, capital needs analysis, framing
JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41
Suggested Citation: Suggested Citation