Are you altering your approach to investors based on the type of behavioral investor they are? Prof. Victor Ricciardi, who will be speaking about behavioral finance at this Friday's A4A webinar, says advisors should be doing just that.
I asked Ricciardi to send me a note about one aspect of what he will cover during his session on Friday, and he sent me a few sentences pointing out the difference between the two types of behavioral investors, "overconfident" versus "status quo" investors.
Riccardi's suggestion that advisors alter their approach to investors based on their behavioral investing profile, shows how behavioral finance -- ivory tower research -- can be so very important in how a practitioner deals with different types of investors.
"Investment advisors should implement a balanced approach to find the correct middle ground in providing advice to these two groups of investors," says Ricciardi.
The field of behavioral finance is of huge importance and is attracting a lot of attention in academia. But connecting it to how practitioners treat different clients brings the research down to a new practical level. It can help advisors communicate better with clients and behave more rationally. So I am pretty excited about bringing Ricciardi to the Advisors4Advisors webinar series.
Ricciardi is a Finance Professor at Goucher College in Baltimore, Maryland and co-editor of the new book Investor Behavior: The Psychology of Financial Planning and Investing with Kent Baker.
In asserting that practitioner's should treat some clients one way and other clients another way based on the investor's behavioral investing profile, Ricciardi cited a recent article he co-authored with Kent Baker entitled, “How Biases Affect Investor Behaviour,” which was published in The European Financial Review, and that included this description of the two types of behavioral investors: