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Behavior matters

By focusing on education and awareness around behavioral biases, advisors can deliver even more value to clients—and potentially build even stronger practices. Here's how to start.

The fundamentals of behavioral finance

Behavioral biases can drive investors to make counterproductive decisions, and market crises often pave the way for these cognitive and emotional influences to emerge. With more than 20 years of experience in asset management, Omar Aguilar, Ph.D.—a Chief Investment Officer (CIO) at Charles Schwab Investment Management and practitioner of behavioral finance—offers practical insights in the article series below that can help advisors address biases in clients.

The behavioral advantage

Teaching clients about the most common behavioral biases can make it easier to identify and address them—and potentially lead to stronger, more durable advisor/client relationships.

Home bias

It’s easy to stick with what you know. But for clients, this investment approach can lead to less diversified—and potentially riskier—portfolios. Here’s how to spot and address home bias.

Overconfidence bias

Most of us tend to overestimate our abilities. When it comes to money matters, such overconfidence can cause real trouble. Here’s how to help clients take a more measured approach.

Loss aversion bias

Taking a loss is painful. In fact, research suggests that we feel the pain of loss much more than the joy of equivalent gains. But efforts to avoid losses can sometimes introduce new risks that may be damaging—especially for investors. Read more.

Recency bias

Overemphasis on recent events can keep you from gathering the information you need to before making a decision. For clients, recency bias may lead to ill-informed investments. Help them take a broader view of the financial markets.

Confirmation bias

It’s great to find other voices that support what you believe. But this confirmation bias approach can be damaging—especially for investors. Here's how to bring more perspective to your clients' financial decision making.

Omar Aguilar, PhD

Omar Aguilar is a Senior Vice President and Chief Investment Officer of Passive Equity and Multi-Asset Strategies for Charles Schwab Investment Management, Inc. (CSIM). He has been in asset management for more than 20 years, is a practitioner of behavioral finance, and is responsible for all passive equity and multi-asset strategies for CSIM.

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Omar Aguilar

Related Resources

Behavioral insights

Learn about bias mitigation techniques and the impact of investor behavior on the markets.

BeFi Barometer

Learn how advisors are viewing and using behavioral finance, in this survey conducted by Cerulli Associates, Inc.

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