Weekend Reading for Financial Advisers: Loss Aversion, Goldman Sachs, and Ted Talks

Categories: Behavioral Finance, Private Wealth Management
Weekend Reading

Here are some of my top picks for the most interesting recent articles, radio shows, and video clips, just in case you missed them.

Behavioral Economics

  • Want to have a guess at the most destructive behavioral bias? Spoiler Alert: According to a recent study, it is anchoring. (CFA Digest)
  • The “real enemy” of wealth accumulation, according to Daniel Kahneman, is loss aversion. In this article, the father of behavioral economics answers “ten questions” that every adviser should read. (Journal of Financial Planning, PDF)
  • Another topic that Kahneman frequently touches on is what he calls the “planning fallacy.” As Bob Seawright explains in a blog post, “Our ability even to forecast the future, much less control the future, is extremely limited and is far more limited than we want to believe.” The upshot? “If your investment approach requires or even includes a relevant forecast of future events, be very careful. And the more specific the forecast, the more careful you should be.” (Above the Market)
  • If you are newcomer to the area of behavioral economics/finance and would like to learn more about Kahneman, author of the best-selling book Thinking Fast and Slow, take a look at the profile, “The King of Human Error,” by another best-selling author and keen observer of human behavior, Michael Lewis. (Vanity Fair)

The Industry

  • Speaking of Lewis, columnist Alison Frankel notes that Greg Smith — the erstwhile Goldman Sachs vice president whose supposed tell-all, Why I Left Goldman Sachs, just hit book stands — is no Michael Lewis when it comes to the written word. But what caught her attention was something he said during an interview on 60 Minutes. Smith “echoed an accusation that’s become a meme of financial crisis litigation: Goldman abused the trust of unsuspecting clients when it offloaded its exposure to mortgage-backed securities via complex financial instruments.” Frankel explores this idea in “Goldman Sachs and the Sophisticated Investor: Who’s Duping Whom?” (Thomson Reuters)

Valuation and Sentiment Analysis

Tax and Estate Planning

Retirement

Social Media

And Now for Something Completely Different

  • If you are a fan of ideas, then no one does a better job of spreading them than TED (which stands for Technology, Entertainment, Design). Back in August, the nonprofit compiled a list of the 20 most-watched TED Talks to date. The topics range from education to brain function to inspiring messages to techno-possibilities. (TED)

For more news and trends, visit the Private Wealth Management Community of Practice page.


Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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