Loss Aversion is a common bias experienced by investors.
It’s a cognitive bias that clients can experience whereby they feel the pain of a potential loss far more keenly than the benefit of a potential gain.
In other words, Loss Aversion leads us to feel much more strongly about the possibility of losing £1000 than we do about the opportunity to gain £1000.
For example, when clients show signs of this bias they may be hesitant to make investment decisions, preferring to ‘stay put’ and not accept a recommendation to realign their investment decisions with the current market, because the pain of crystallising a loss would feel unbearable.
As an adviser is this something you encounter with your clients?