Advisor Insights

The Dangers of the Status Quo in Investing

Michael Pompian

This is the 10th article in the Behavioral Finance and Macroeconomics series, exploring the effect behavior has on markets and the economy as a whole and how advisors who understand this relationship can work more effectively with their clients. 

Status quo bias is an emotional bias that predisposes people facing an array of choice options to elect whatever option ratifies or extends the existing condition (the status quo) in lieu of alternative options that might bring about change. In other words, status quo bias operates in people who prefer for things to stay relatively the same.