Investire | October 2024
Daniel Kahneman, the late Nobel Prize winner for economics in 2002, was the first psychologist to obtain this recognition as the father of behavioral finance.
His work questioned the concept of rationality underlying decision-making processes, overturning the assumptions that had dominated economics for centuries.
In 2011, Kahneman with the bestseller “Thinking, Fast and Slow” presented a complete vision of the mind governed by two systems, one fast and intuitive, the other slow and more rational.
Another psychologist, Richard Thaler, will win the Nobel Prize for Economics in 2017 for his work culminating in the book Nudge, in which he identifies the ways in which distortions in decision-making processes can be corrected by positive conditioning induced by the context.
Two Nobel Prize winners known by all savings management professionals and considered two sacred monsters, but evidently not so sacred as to study their studies well and above all to apply their principles, fruit of years of studies, concretely and in daily activity.
From the research that FINER conducted for EFPA and which involved a sample of professionals (financial consultants, private bankers and banks) and end investors, it emerged that behavioral finance, or rather its principles, are known only by 66% of the first and 17% of the latter.
As if that weren’t enough, among those who declared they knew the principles of behavioral finance, only 34% of professionals and 17% of end investors actually applied them.
The very few professionals and clients who apply the principles of behavioral finance do so almost exclusively (79% and 85%) as a topic of conversation and not in investment choices (21% and 15%).
The paradox is that professionals and their clients who apply the principles of behavioral finance in their investment choices recognize their usefulness in 81% and 75% of cases respectively.
Among the reasons for the recognized usefulness of the application of behavioral finance for professionals and their clients, the greater awareness of choices (81% and 76%), the improvement of the dialogue between consultant-client (69% and 71%), the overcoming of barriers to investing (42% and 59%) and greater serenity and tranquility (33% and 29%).
The six most widespread cognitive errors among Italians are: aversion to losses (82%), the herd effect (75%), inertia, i.e. making decisions on the basis of familiar patterns already experienced (62%), anchoring, i.e. fixation on the first information received (51%), excess confidence (44%) and the attribution error which consists in ascribing credit for choices with a positive outcome to oneself, instead attributing the credit to others fault of those that went badly (38%).
The analysis of the six most widespread cognitive errors among Italians then reveals some interesting implications: there are significant differences between women and men, between those with assets of different sizes, between different generational cohorts.
There is therefore the opportunity to segment current and potential investors in a practical and concrete way, defining for each of them the most correct approach and the characteristics of the ideal professional for them.
All this would allow us to broaden the pool of investors and increase their awareness: so, what are we waiting for to move from theory to practice?
Nicola Ronchetti