Behavioural Finance

Irrational behaviours can be among the most difficult behaviours to deal with. People exhibiting irrationality tend to focus on their own way of thinking rather than a more predictable mindset. This irrational mindset can have negative consequences for a person’s life and investments.

Luckily, there are ways to bring an irrational person back to a rational mindset. As an investment advisor, it is your job to identify these behaviours and then correct them. Client irrationality, left unchecked, can wreak havoc on an investment portfolio.

Behavioural Finance: Lesson 1

Introduction to Economic Theory

This course briefly introduces Traditional Finance Theory as a backdrop to the new field of Behavioural Finance Theory. This first section will go over the assumptions that Traditional Finance Theory makes and how, in real life, not all of them hold up. Additionally, you will be introduced to Behaviour Finance and shown how it fills in the holes left by Traditional Finance Theory. Lastly, you will be introduced to some of the anomalies of the market place as well past market inefficiencies and market crashes.

Behavioural Finance: Lesson 2

Investment Behavioural Types and Biases

This section focuses on how irrationality affects the stock market. It will identify some of the flaws of Traditional Finance Theory and how the new field of Behavioural Finance attempts to circumvent these flaws. This section also highlights some biases your clients might have and possible pitfalls to investment that you can help them avoid. The course material will help you to identify types of investors and to anticipate their needs and preferences. Overall, the course objective is to make you a better advisor, able to serve your clients with a broader perspective and maximize the returns on their portfolios.

More Info On Course


Behavior Investment Types (BIT)

This section will focus on the personality traits of certain investors. Each of these personality types exhibit some kind of irrational behavior, that when identified, can help you better serve your client. You might also see some of this behaviour in yourself.

These types do not necessarily have to be memorized, but knowing how to identify certain personality traits will help you work through your client’s irrational behaviour.

In this section we will go over the difference between a passive and active investor. We will also show how the investment goals of a person changes as their age changes. Lastly, we will go over two behavior-based models based on the different behaviour types prevalent in investors.

Passive vs. Active Investor

  • Passive investors are those investors that generally acquire their wealth through inheritance or through risking other people’s money. These people generally have a high need for security and have a low tolerance to risk. Many of these people are also generally older and closer to retirement age. Plus, passive investors are more focused on preserving their wealth than gaining more.
  • Active investors have been actively involved with the creation of their own wealth. They have also risked their own capital in achieving their wealth. Generally these people have a high-risk tolerance. These people are often demanding clients and like to be involved in their finances.

An investment advisor and/or life agent needs to understand the perspective of the client to better serve his or her needs. For example, offering a bond index fund to an active, risk-focused investor may show less success than to a passive investor.

Access Duration from the Date of Purchase: 6 Month(s)

Credit Hours: 4

Credit Type: Life/A&S

Credit #: AIC45737 MB28340

Accrediting Provinces:

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