Financial ‘physicians’ help investors diagnose problems and stick to a regimen
Psychology, not finance, is one of the most important factors in achieving long-term goals
Most people’s understanding of a wealth manager’s role is someone who looks after clients’ investments and money. But our role extends far further. Just as important is helping people achieve a deeper understanding of how, through their emotional reactions, they behave towards money, and how we guard them against the innately human tendency to panic.
Daniel Kahneman won a Nobel prize for his analysis on the inner workings of the human brain, and it is in this field where we find that psychology, not finance, is one of the most important factors in achieving clients’ long-term financial objectives. Research has found that humans tend to suffer the pain of a loss almost twice as much as the pleasure of an equal gain. Our human brain, with its emotional and cognitive biases, often leads us to make inferior financial decisions. Though events such as the Covid-19 pandemic have undesirable consequences, the markets have previously recovered every time. In the global financial crisi...
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