More advisors than ever before are turning to behavioral finance concepts to help guide their clients through volatile times.

In fact, this year 81% of advisors in Charles Schwab Investment Management’s BeFi Barometer 2020 survey said they were applying behavioral finance when working with clients, up from 71% in 2019.

“I’m thrilled that advisors are actually putting this into practice, and it’s having beneficial outcomes for their clients,” said Devin Ekberg, chief learning officer for the Investments and Wealth Institute, in a Schwab-sponsored Tuesday webcast reviewing the study’s results. “It shows that they believe an advisor’s job goes beyond talking people off of the ledge, all the way to creating and designing systems to help humans make better decisions,” before a crisis or market volatility emerges."

Advisors who used behavioral finance, a group that Schwab calls “behavioral advisors,” said that through the spring market volatility it helped keep their clients invested (55%), strengthened their relationships with existing clients and assisted with client retention (48%), helped them to better manage client expectations through effective communication (40%), reduced short-termism (37%) and helped them better understand clients’ feelings towards risk (33%).

“Advisors not using behavioral finance were basically trying to do a lot of things and make a lot of decisions quickly,” said Omar Aguilar, Charles Schwab Investment Management senior vice president and chief investment officer of passive equity and multi-asset strategies, during Tuesday’s webcast. “Advisors that have behavioral finance as part of their regular practice were better prepared to deal with market uncertainty and client requests, so they could be proactively thinking for the future.”

Advisors applying behavioral finance within their client relationships were more likely to report being able to attract new clients during the first quarter of 2020—66% of Schwab’s behavioral advisors said they had added clients, versus 36% of non-behavioral advisors.

Behavioral advisors were also more likely than advisors not using behavioral finance to engage in tax-loss harvesting, allocate to active managers, increase single-stock allocations and increase allocations to index funds.

On the other hand, behavioral advisors were less likely to maintain strategic allocations, make incremental additions to depreciated asset classes, reduce risk or move money to safer investments, and increase their clients’ downside protection.

Like last year, advisors said the most common behavioral bias they saw was recency, or the tendency to emphasize the most recently encountered information, with advisors reporting the same levels of recency in 2020 as they did in 2019. However, other common biases became significantly more prevalent during the early part of 2020 than they were in 2019, including loss aversion, framing, familiarity/home bias and mental accounting.

Asher Cheses, a senior research analyst with Cerulli Associates, said the coronavirus was directly responsible for the increased prevalence of some biases, including framing, which was exacerbated by the way various publications and broadcast channels presented news, as well as mental accounting, likely driven by stimulus checks deposited into client accounts in the spring.

“We also wanted to understand how different biases impacted advisors making decisions on behalf of clients, and we saw significant upticks in loss aversion, overconfidence and confirmation bias (among advisors),” Cheses  said in Tuesday’s webcast. “It’s important for advisors to understand these biases and manage the influence these are having not only on clients, but also on their own investment decisions.”

The BeFi Barometer 2020, was conducted by Cerulli Associates in May and June 2020 and reflects the views of over 300 advisor members of the Investments and Wealth Institute.