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Overview
The second in the CFP Board Center for Financial Planning Series, Client Psychology explores the biases, behaviors, and perceptions that impact client decision-making and overall financial well-being.
This book, written for practitioners, researchers, and educators, outlines the theory behind many of these areas while also explicitly stating how these related areas directly impact financial planning practice. Additionally, some chapters build an argument based solely upon theory while others will have exclusively practical applications.
- Defines an entirely new area of focus within financial planning practice and research: Client Psychology
- Serves as the essential reference for financial planners on client psychology
- Builds upon and expands the body of knowledge for financial planning
- Provides insight regarding the factors that impact client financial decision-making from a multidisciplinary approach
Product Details
ISBN-13: | 9781119436263 |
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Publisher: | Wiley |
Publication date: | 03/13/2018 |
Pages: | 336 |
Product dimensions: | 6.40(w) x 9.00(h) x 1.50(d) |
About the Author
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Table of Contents
Acknowledgments xi
Preface Charles R. Chaffin, EdD CFP Board Center for Financial Planning xiii
About the Contributors xix
Chapter 1 Client Psychology Charles R. Chaffin, EdD, CFP Board Center for Financial Planning Jonathan J. Fox, PhD, Iowa State University 1
References 9
Chapter 2 Behavioral Finance Swarn Chatterjee, PhD Joseph Goetz, PhD, University of Georgia 11
What Is Behavioral Finance? 12
Applications of Behavioral Finance in Understanding and Changing Clients' Behavior 14
Summary 16
References 17
Chapter 3 Understanding Client Behavior: Rational or Irrational? Swarn Chatterjee, PhD Joseph Goetz, PhD, University of Georgia 19
Bounded Rationality 19
Sunk Cost Fallacy 22
Flat Rate Bias 23
Summary 23
References 24
Chapter 4 Heuristics and Biases Jodi Letkiewicz, PhD, York University 25
System 1 and System 2 26
Heuristics 27
Bias Reduction 34
References 39
Chapter 5 Decision-Making under Risk HanNa Lim, PhD, Kansas State University 43
Expected Utility Theory 43
Violations of Expected Utility Theory 44
Prospect Theory 46
Effects in Prospect Theory 51
Implications for Research and Practice 55
References 62
Chapter 6 The Role of Mental Accounting in Household Spending and Investing Decisions C. Yiwei Zhang, PhD Abigail B. Sussman, PhD, The Universityof chicago Booth school of Business 65
Mental Accounting as Categorization 66
Methods for Categorizing Funds 67
Budgeting 73
Implications for Investing 82
Concluding Remarks and Future Research 86
References 89
Chapter 7 Intentional Choice Architecture Michael J. Liersch, PhD 97
Are You an Intentional Choice Architect? 98
Principle 1: Humans Have Limitations 101
Principle 2: Humans Use Reference Points to Make Decisions 103
The Choice Architect's Opportunity 106
The Case for Intentional Choice Architecture: Retirement Savings 107
Plan Participation, Deferral Rates, and Default Investment Options 110
From Awareness to Action 114
References 116
Chapter 8 Cognition, Distraction, and the Financial Planning Client Nils Olsen Vanessa G. Perry Zhuo Jin, George Washington University 119
Influences on the Frame of Mind 120
Emotion, Stress, and Touch 122
Choice and Cognitive Overload 125
Visual Portrayal of Data 126
Losses and Gains 127
Cognitive Resource Depletion 127
Implications for Financial Planning Professionals 130
References 133
Chapter 9 Personality and Financial Behavior Sarah D. Asebedo, PhD, CFP®, Texas Tech University 137
Models of Personality 138
The Relationship between Personality and Financial Behavior 139
Openness to Experience 140
Conscientiousness 141
Extroversion 142
Agreeableness 144
Neuroticism 145
Connecting Personality to Financial Behavior through Theory 147
Personality Measurement 148
Implications for Research and Practice 149
Future Direction 150
References 151
Chapter 10 Risk Literacy Meghaan R. Lurtz, MS Stuart J. Heckman, PhD, CFP®, Kansas State University 155
Berlin Numeracy Test 156
Risk Literacy and Financial Planning 160
Conclusion 161
References 162
Appendix 164
Berlin Numeracy Test for General Population 164
Berlin Numeracy Test for Educated Population 165
Chapter 11 Automated Decision Aids: Understanding Disuse and Designing for Trust, with Implications for Financial Planning Jason S. McCarlay, PhD, Oregon State University 167
Mechanical versus Holistic Judgment 168
Algorithm Aversion and Automation Disuse 170
Trust in Automated Systems 172
Conclusion 176
References 177
Chapter 12 Self-Determination Theory and Self-Efficacy in Financial Planning Charles R. Chaffin, EdD, CFP Board Center for Financial Planning 181
Self-Determination Theory 182
Self-Efficacy 184
References 186
Chapter 13 Marriage and Family Therapy, Financial Therapy, and Client Psychology Kristy Archuleta, PhD Sonya Britt-Lutter, PhD, Kansas State University 189
Marriage and Family Therapy 190
Family Systems Theory 191
Financial Therapy 195
Building Alliances with Families and Couples 196
Referrals and Collaborations 198
Conclusion 200
References 200
Chapter 14 Client Diversity: Understanding and Leveraging Difference to Enhance Financial Planning Practice Quinetta Roberson, PhD, Villanova University 203
Understanding the Concept of Diversity 204
The Business Value of Diversity 209
Leveraging Client Diversity 211
Practice Perspectives 213
Conclusion 218
References 218
Chapter 15 Client Psychology: The Older Client Deanna L. Sharps, PhD, CFP®, CRPS®, CRPC®, University of Missouri 221
Introduction 221
Age-Related Changes in Brain Structure and Function 226
Aging and Economic Decision-Making 233
Concerning Signs 237
Supporting Older Clients 239
Research Challenges 242
Final Thoughts 245
References 246
Chapter 16 Financial Psychology Bradley T. Klontz, PsyD, CFP®, Creighton University Faith Zabek, MEd, Georgia State University Edward Horwitz, PhD, CFP®, Creighton University 253
Financial Psychology 254
Financial Psychology for Financial Planners 259
Motivational Interviewing Techniques 261
Conclusion 265
References 266
Chapter 17 Money Disorders and Other Problematic Financial Behaviors Edward Horwitz, PhD, CFP®, Creighton University Bradley T. Klontz, PsyD, CFP®, Creighton University Meghaan Lurtz, MS, Kansas State University 271
Literature on Money Disorders and Related Financial Behaviors 273
Addressing Money Disorders and Related Financial Behaviors 278
Case Studies 280
Overspending and Compulsive Buying Disorder 280
Financial Denial or Avoidance 282
Financial Enabling and Dependency 283
References 285
Chapter 18 Situation Awareness in Financial Planning: Research and Application Charles R. Chaffin, EdD, CFP Board Center for Financial Planning John Grable, PhD, CFP®, University of Georgia 289
Perception 292
Comprehension 293
Prediction 294
Future Directions 298
References 299
Chapter 19 Final Remarks Charles R. Chaffin, EdD, CFP Board Center for Financial Planning 301
References 304
Index 305