How have investor expectations and behaviors evolved under the new U.S. administration? With recent strides in artificial intelligence, how is the role of the financial advisor changing?
These and other questions were discussed by experts in behavioral finance during a webinar on April 16, 2025, titled “The Future of the Investment Professional: Mastering the Psychology of Investor Behavior.” The panelists touched on issues that will be discussed more fully at the upcoming conference, CFA Institute LIVE 2025 to be held in Chicago, 4-7 May, 2025.
The panel moderator, Peter Lazaroff [Photo, RHS], is Chief Investment Officer at Plancorp Private Wealth Management. He asked for a read on current investor sentiment.
“It’s tough to tell what investors are thinking,” replied Brian Portnoy [Photo, center], founder of Shaping Wealth, and author of multiple bestselling books, including The Geometry of Wealth: How to shape a life of money and meaning.
He sees the present time as a classic case of VUCA: volatility, uncertainty, complexity, and ambiguity. “There is market volatility and policy uncertainty. Investors want to know, ‘How can I make sense of this?’ There is tribalism in times of perceived danger…. You want to do something, you’re worried about your financial future, and it’s too uncomfortable to do nothing.”
Portnoy said, “The average advisor says, ‘How can I help you?’ The above-average advisor says, ‘We have planned for this.’ The below-average advisor is annoyed and thinks the client is needy and irrational.”
Lazaroff asked panelists, “How are you using financial tools?”
“The plan is a lifeboat,” said Michael Antonelli, Market Strategist and Managing Director at Baird Private Wealth Management. [Photo, LHS] “In difficult times, does it make sense to jump out of the lifeboat? Behavioral finance is embedded in your everyday thinking. When it comes to wealth management, if it is goals-based then it falls apart, but if it is purpose-based, that’s a better outlook.”
There are three things clients want to see from their financial advisor. “People want to be heard, they want to be helped, or they want to be hugged,” Baird said. A financial advisor must listen and assist and reassure the client.
When it comes to communication and leadership, there were two things the adviser should not do. “You shouldn’t tell the client, ‘Don’t worry, you’ll be rich in 40 years.’ Also, you shouldn’t say, ‘Here’s a graph of the 10 worst days of the stock market and the 10 best days.’” Deal with the here and now, instead of quoting facts about stock markets in general.”
“Behavioral finance was barely in the CFA curriculum in 2007,” Lazaroff said, “and it only covered cognitive and emotional biases. Now we are in this stage of behavioral finance 2.0. It is not just ‘look at human cognitive errors,’ but ‘What can we actually do about them?’”
“We are evolving from ‘behavioral finance as a tool’ to something that is embedded in the practice,” Portnoy said. “Behavior is like gravity. We never think about how to respond to gravity. We are feeling creatures who think. Behavioral finance was once just a list of the way humans are flawed. For example, confirmation bias, loss aversion bias. Behavioral finance is not just an add-on to regular finance.”
Michael Antonelli said that at Baird, “We teach our advisors this is not a product business, it is a people business. At the heart of wealth management is hopes and dreams. An investor needs to know, ‘What do I want out of life?’”
“Economics is the study of how things should work,” Antonelli said. “Behavioral finance is the study of how things really work.”
Peter Lazaroff asked, “How about artificial intelligence? We are discovering it’s only as good as the questions you use…. It’s all about asking good questions—and the same goes for being a financial advisor. Behavioral finance is similar to AI.”
Portnoy agreed. “The power of questions is something hidden in plain sight. Questions are high-powered, high-impact things. Questions should be invitations, not interrogations. The question is an encouragement to a broader exploration. Ask your client, ‘Tell me more about that.’”
“For example, a portfolio is down 10 percent. The client feels upset they have to give up their vacation home. ‘Tell me more’ unlocks the way to finding a solution.” He urged the audience to try saying tell me more to the client to see the power of this question. “You will show that you have heard and validated someone.”
All panelists agreed that understanding cognitive biases and emotional influences can transform client relationships and drive success in the investment and asset management industry.
Key Takeaways
The May conference will have a full section on behavioral finance. The CFA Institute programming ensures that attendees will explore the intersection of psychology, technology, and evolving client expectations and come away with five key takeaways.
- Mastering Behavioral Insights: Gain a deeper understanding of cognitive biases and emotional triggers shaping investor behavior and expectations.
- Skills for the Future: Discover the key competencies investment professionals need, including behavioral finance and empathetic client engagement, to stay ahead.
- Technology and Psychology: Learn how AI, analytics, and other technologies can work in synergy with behavioral insights to enhance decision-making and strategies.
- Client-Centered Strategies: Explore how applying behavioral insights can strengthen trust, foster deeper client relationships, and deliver better investment outcomes.
- Futureproofing Your Career: Identify strategies to evolve with your clients, embrace lifelong learning, and establish yourself as a forward-thinking leader in the industry.
Attendees will come away with actionable insights and strategies to futureproof their careers, strengthen client relationships, and thrive in the dynamic world of investment and asset management. ♠️
Peter Lazaroff has a podcast at thelongterminvestor.com
Brian Portnoy can be reached at shapingwealth.com
Michael Antonelli can be reached at bairdwealth.com
Click here to register for the upcoming conference, CFA Institute LIVE 2025 to be held in Chicago, 4-7 May, 2025.