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The road to retirement success: Understanding — and overcoming — your clients’ behavioral biases

August 24, 2017

2017-08-24

By InvestmentNews, Great-West Financial®

Behavioral finance research has revealed that a key assumption about the way individuals make economic decisions is not quite true. In terms of investment decision-making in particular, we now know that while people are rational much of the time, they don’t make rational decisions all of the time. This is not due to willfulness or ignorance, but rather because our all-too-human biases, emotions and habits often outweigh our reason. The way we think and react can defeat even the best of intentions and lead to inferior outcomes, particularly when investing for a long-term goal such as retirement.

Based on psychological and behavioral economics research at the Stanford Center on Longevity, a growing body of knowledge has emerged that can help financial advisors better serve their clients by acknowledging and overcoming these tendencies. This white paper will draw on that knowledge to help advisors understand some of the common biases clients bring to investing and the advisory relationship, as well as the stresses clients face in decision-making.

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