• / Free eNewsletters & Magazine
  • / My Account
Home>Practice Management>Practice Builder>Outcome Bias Can Bite When Clients Don't Dig Deeper

Related Content

  1. Videos
  2. Articles
  1. 401 (k ) Pros and Cons

    These plans offer investors many benefits in saving for retirement, but they also have their drawbacks.

  2. Bogle : The Problems With 401 (k )s

    The 401 ( k ) is really a thrift plan that we've tried to redesign into a retirement plan , and it needs to change, says the Vanguard founder.

  3. Benz: A Second-Quarter Portfolio Checkup in 4 Steps

    You're likely to see red ink in bonds and still-strong year-to-date performance in stocks when you check your portfolio after a rocky second quarter. Our director of personal finance offers tips for what to do next.

  4. Encouraging Trends for Retiree Finances

    Recent studies have found retirees' health-care expenses have decreased while their account balances have moved higher, but there's still a generational divide in terms of savings.

Outcome Bias Can Bite When Clients Don't Dig Deeper

One of the most basic investing mistakes is focusing on a past investment outcome without regard to the process or factors behind it.

Michael M. Pompian, 01/19/2017

This month's article is the 22nd in a series called "Behavioral Finance and Retirement," which is intended to provide insight to advisors on the unique needs and financial behaviors of clients who are entering that period of transition called "retirement."

I put retirement in quotation marks because people today are not retiring the way they used to. The days of the retirement party, the gold watch, and sitting out one's years doing crossword puzzles and watching "Wheel of Fortune" are over for most people.

We've all heard the analogy that the baby boomers are like a baseball going through a garden hose. Well, the baseball is getting to the end of the hose, and it's not leaving without a bang! And before it leaves, it will be a financial force to be reckoned with.

To serve retired clients properly, there are some key themes that advisors need to be aware of:

1. People are living longer than ever thanks in part to medical technology and better living habits such as diet and exercise. This is extending the length of time people are in a nonworking phase of life.

2. People's definition of retirement is changing, which is having a major impact on how individuals manage their finances.

3. In some cases, a certain segment of the population will have no choice but to produce some type of income after they leave the traditional workforce.

4. The responsibility of planning and investing for retirement has shifted in large part to the employee/retiree and away from corporations. As a result, behavioral biases significantly affect individuals who are entering or already in this phase of life.

The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

Upcoming Events
Conferences
Webinars

©2014 Morningstar Advisor. All right reserved.