Six ways consumers are biased and what this means for advisers

Six consumer biases advisers should be aware of

Carmen Reichman
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Consumers make financial decisions based on their understanding of the information provided by their adviser. But there are a number of ways people are biased which influence the way they perceive that information.

In its latest paper on adviser disclosure the regulator suggested creating a visual aid in the form of a label to help advisers illustrate information to their clients, including the adviser's status and charges. The research work which informed the regulator's thinking pointed to six forms of consumer bias advisers should be aware of when dealing with their clients. 1) Present bias Present bias is the tendency to over-value immediate rewards at the expense of our long-term intentions. Present bias typically leads people to over-borrow and pay down debt slower than they want. ...

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