Behavioral Finance and Investor Types
The essence of being a great financial advisor is to be a great people person. While you must be technically competent, to really excel, you must understand how people behave in order to build lasting relationships and ultimately improve your clients' investment outcomes.
From Michael Pompian, the bestselling author of Behavioral Finance and Wealth Management comes the next-step resource for achieving investing success by understanding your individual client's behavior type. As Pompian explains, there are four basic Behavioral Investor Types (BITs) that define an investor's personality and help advisors make an insightful and accurate assessment of their clients in order to better serve them.
Preservers: Noted for financial security and preserving wealth rather than taking risks to grow wealth. They are guardians of their assets and take losses very seriously.
Followers: Lack direction with their money and investing. They follow the lead of their friends and colleagues or a general investing approach to make their investment decisions.
Individualists: Engaged in the financial markets and may have unconventional views on investing. This "contrarian" mind-set may be helpful at times but may also cause this group to get irrationally anchored to their views.
Accumulators: Interested in accumulating wealth and are confident that they will be successful investors. They like to adjust their portfolio allocations and holdings but may not wish to follow a structured plan.
Engaging and informative, this reliable resource offers an overview of behavioral finance concepts and an introduction to behavioral biases. It also includes a detailed explanation of Behavioral Investor Type Diagnostic Testing and gives practical advice on capital markets and asset classes, asset allocation, and financial planning and investment advice for the four Behavioral Investor Types described. The author's BIT identification method is a multi-step diagnostic process that can help you zero in on the right plan that fits a particular client's investment expectations.
Behavioral Finance and Investor Types provides financial advisors with a better sense of what drives investors. By using the information found here, you'll quickly become savvy about the range of investor behavior types and discover how that knowledge can better position you in your role as a trusted advisor.
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