Another bias-based challenge that a Financial Adviser may come across…
Anchoring Bias
But what is it and how can it affect you when providing financial advice to your clients?
When your client is faced with important decisions about their finances they will often (entirely sub-consciously!) use an ‘anchor’ as a starting point. This means they rely too heavily on this particular piece of information (often the first fact acquired) without seeing the bigger picture. Inevitably this may cloud their judgment, as they are not giving due attention to other data, which may be more important or relevant to the decision.
As a Financial Adviser you will already know that it is key to present to your client ALL of the relevant information and options open to them in order for them to make an informed decision. However, some clients may have a tendency towards this bias and it’s not always easy to spot.
Equally, you may have identified this type of behaviour, but don’t fully understand the drivers behind this or how to help your client deal with the situation.
By using our Investment Personality Profile software together, you and your client can learn about this bias and work through ways to combat it to ensure your client makes the right financial decision for them (and in turn allow you to gain that all important trust with your client).
Do you find some of your clients fall into this pattern? If so, how do you deal with it?
