or herself. An advisor suffering from this bias takes no responsibility for such business failures. It may protect the advisor’s self-esteem, but it keeps him or her from learning from failures and shortcomings and evolving into a true leader.
Getting Beyond The Biases
The antidote to these biases starts with self-awareness. Once RIAs recognize their biases, they can put checks and balances in place to make more thoughtful decisions.
For starters, advisors should first determine what information they need to make a decision and then seek it out, rather than base their decision on information that’s easily available. This could mean being patient while sufficient data is gathered in order to avoid making hasty decisions. The key is not to wait for all the data, but to establish a reasonable time frame for collecting enough so that the decision is an informed one.
Advisors should use the appropriate financial models to make economic decisions, and supplement this with qualitative components. They can eliminate many biases if they start with the proper framework at the outset—even if model assumptions are necessary.