• Frontline
  • Warren Buffett
  • Volvo
  • NASDAQ Composite Index
  • 10 Year Treasury
  • Commercial Banks
  • JPMorgan Chase
  • Emerging Markets
  • Commerce Department
  • Home
  • Practice Management
  • Research & Insights
  • Alternatives
  • ETF Managed Portfolios
  • Home>Practice Management>Practice Builder>Stick to the Facts to Overcome Affinity Bias

    Related Content

    1. Videos
    2. Articles
    1. Why Some Retirees Have High Stock Stakes

      Pensions, legacy planning, and a bull market have led to higher equity allocations for self-directed IRA investors, says Vanguard's Maria Bruno.

    2. 5 Retirement -Planning Pitfalls

      Not having a plan at the outset, holding too much company stock, and being too generous with family can trip up retirees , says Baird's Tim Steffen.

    3. How to Build Your Income Stream

      As yields remain low, today's retirees have to really think out of the box when it comes to building an income stream; noted advisor Harold Evensky and Vanguard's John Ameriks explore practical strategies to obtain income without overstretching for yield.

    4. Retirees : Beware of Complacency

      Christine Benz warns that a strong stock market may mean that retirees are overlooking some key risks.

    Stick to the Facts to Overcome Affinity Bias

    When your clients suggest investment ideas from friends and family, they may be suffering from affinity bias.

    Michael M. Pompian, 10/20/2016

    This month's article is the 21st in a series called "Behavioral Finance and Retirement," which is intended to provide insight to advisors on the unique needs and financial behaviors of clients who are entering that period of transition called "retirement."

    I put retirement in quotation marks because people today are not retiring the way they used to. The days of the retirement party, the gold watch, and sitting out one's years doing crossword puzzles and watching "Wheel of Fortune" are over for most people.

    We've all heard the analogy that the baby boomers are like a baseball going through a garden hose. Well, the baseball is getting to the end of the hose, and it's not leaving without a bang! And before it leaves, it will be a financial force to be reckoned with.

    To serve retired clients properly, there are some key themes that advisors need to be aware of:

    1. People are living longer than ever thanks in part to medical technology and better living habits such as diet and exercise. This is extending the length of time people are in a nonworking phase of life.

    2. People's definition of retirement is changing, which is having a major impact on how individuals manage their finances.

    3. In some cases, a certain segment of the population will have no choice but to produce some type of income after they leave the traditional workforce.

    4. The responsibility of planning and investing for retirement has shifted in large part to the employee/retiree and away from corporations. As a result, behavioral biases significantly affect individuals who are entering or already in this phase of life.

    The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.