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Decoding client biases

Educate your clients about behavioral finance to deliver even more value and build a stronger practice. Learn how to skillfully guide them toward financial success.

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The fundamentals of behavioral finance

Behavioral biases can drive investors to make counterproductive decisions, and market crises often pave the way for these cognitive and emotional influences to emerge. With more than 25 years of experience in asset management, Omar Aguilar, Ph.D.—Chief Executive Officer and Chief Investment Officer for Schwab Asset Management®, and practitioner of behavioral finance—offers practical insights in the article series below that can help advisors address investment biases in clients.

The behavioral advantage

Teaching clients about the most common behavioral biases can make it easier to identify and address them—and potentially lead to stronger, more durable advisor/client relationships.

Home bias

It’s easy to stick with what you know. But for clients, this investment approach can lead to less diversified—and potentially riskier—portfolios. Here’s how to spot and address home bias.

Overconfidence bias

Most of us tend to overestimate our abilities. When it comes to money matters, such overconfidence can cause challenges. Here’s how to help clients take a more measured approach.

Loss aversion bias

Taking a loss is painful. In fact, research suggests that we feel the pain of loss much more than the joy of equivalent gains. But efforts to avoid losses can sometimes introduce new risks that may be damaging for investors.

Recency bias

Focusing on recent events can skew the data needed to make a good decision. For clients, this can lead to ill-informed investment decisions. Help them take a broader view of the financial markets.

Confirmation bias

It’s great to find other voices that support what you believe. But confirmation bias can be damaging—especially for investors. Here’s how to bring other perspectives to your clients’ financial decision making.

Omar Aguilar, PhD

Omar Aguilar is Chief Executive Officer and Chief Investment Officer for Schwab Asset Management®. He has been in asset management for more than 25 years, is a practitioner of behavioral finance, and is responsible for leading, developing, and overseeing the firm's investment strategies.

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Omar Aguilar

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