Per Vanguard’s Alpha Study*- Good advice from a Financial Advisor is worth around 3% in net returns over time. 150bps (1.5%) comes from Behavioral Coaching (so half the value a good advisor brings to the table is helping clients manage their behavior and make better decisions), 70bps (.70%) comes from spending strategy and 75bps (.75%) comes from asset location (not allocation).
The study of Behavioral Finance integrates three disciplines: Traditional Finance (Modern Portfolio Theory), Neuroscience, and Psychology. Traditional Finance assumes investors will make rational decisions with their money, that we will make rational decisions without bias and that we always perfectly understand the tradeoff between risk and reward. Considering these assumptions, it is easy to see why BFA® training is needed.
Hunt Country Wealth Management’s Chris Merchant is a trained Behavioral Financial Advisor™. He integrates concepts of Behavioral Finance into our Financial Planning and Advice to help our clients increase their self-awareness, expand their choices and ultimately make better values-based decisions. Sadly, we do not predict the future…but we can certainly help you prepare for it. Behavior Economics has been awarded the Nobel Prize six times since its inception in 1968.
*Source: Bennyhoff CFA, Donald G., & Kinniry Jr. CFA, Francis M. (2016, June). Vanguard Advisors Alpha: Vanguard Research. https://www.vanguard.com/pdf/ISGAA.pdf