Behavioural money management has long been heralded as a promising new field but, in truth, the applications of behavioural science to money management and economics are now broad and well researched. Indeed, economist Richard H. Thaler of the University of Chicago won the Nobel Prize in economics in 2017 for his work incorporating psychologically realistic assumptions into analyses of economic decision-making. A total of six Nobel Prizes have now been awarded for behavioural research.
Central to the concept of behavioural money management is the theory that investor behaviour is influenced by subconscious emotional thought that causes biases. When financial advisers are able to recognise these biases within their client base, they may be in a position to site them directly and consequently mitigate any negative effects. Ontrack asked Simon Russell, director of Behavioural money management Australia, to discuss the evolution of this field and how advisers can use behavioural money management to improve the professional services they offer customers.
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