Julia Rees: The impact of familiarity bias

Unintended risk concentrations

clock • 4 min read

Familiarity bias plays a huge role in the decisions advisers and their clients make. In this piece, Julia Rees explores the ways this can impact on investment decisions and how to overcome it...

If you ask a UK financial adviser whether he or she would invest primarily in Italian stocks and bonds, the answer is always the same: no way! Ask the same question in Italy and the answer is usually, "Si, certo!"  This simple comparison reveals a widely documented bias in the way people invest. Investors often favour familiar, local markets, which they deem to be less risky even if they are not. This familiarity bias turns out to be quite risky and can create large, unintended risk concentrations. Even professional investors are vulnerable.   Another way we see familiarity bias at pl...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Investment

Hargreaves Lansdown and Schroders to launch double LTAF offering

Hargreaves Lansdown and Schroders to launch double LTAF offering

From next week

Eve Maddock-Jones
clock 08 September 2025 • 2 min read
Darius McDermott: Complacency at the peak

Darius McDermott: Complacency at the peak

'Markets to hit new highs, while credit spreads are at multi-decade lows'

Darius McDermott
clock 08 September 2025 • 5 min read
Brown Advisory snaps up Marylebone Partners following summer talks

Brown Advisory snaps up Marylebone Partners following summer talks

Fees lowered as part of deal

Patrick Brusnahan
clock 08 September 2025 • 1 min read