How Advisors Can Make Better Decisions

Source: Research magazine

My latest Research magazine column, from the May 2014 issue, is now available on-line. Its focus is on what we financial advisors can do to improve our decision-making. Here’s a quick taste.

Dalbar’s latest conclusion suggests that individual investors shouldn’t be expected to help themselves. That reality provides advisors with a tremendous and important opportunity. But unless and until advisors improve their own decision-making skills, the opportunity will necessarily be squandered. There is simply no substitute for good judgment. But it remains in remarkably short supply.

I hope you’ll read it all and the entire issue as well.

How Advisors Can Make Better Decisions

Edited to add: Jason Zweig reminded me today that while all the relevant studies show that individuals underperform by a significant amount (we tend to buy high and sell low), Dalbar’s data (the study I reference in the piece) shows a gap that’s much larger than the other research. I should have noted that here. But it doesn’t change the primary point — our decision-making isn’t very good and needs to get much better. It just isn’t likely that it’s quite as bad as Dalbar portrays it.

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