Clients’ financial and economic decisions take many forms. And whether their choices are methodically planned over time, or subtly behavior-driven, there is always a psychology behind them.
One of the most challenging obstacles for planners is what psychologists call loss aversion. And while many advisers might not know the official term, they certainly know the tendency: clients prefer avoiding losses even more than they want to acquire gains. Also called behavioral finance loss aversion, the tendency can hurt investment strategy.
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