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Investors can suffer from various biases while making investment decisions. One of the common biases is the confirmation bias. It is the tendency to look for additional information that confirms their already held beliefs or views. Here, the investors decide first and then look for data to support their views.
Cafemutual spoke to industry experts to understand how MFDs can deal with confirmation bias.
Akta Sehgal, Manas Wealth, Noida feels that MFDs should counter confirmation bias of clients with their knowledge and wisdom. She said, “You should ask a lot of questions to client and give well researched counter arguments and answer all their queries with patience and firmness to help overcome this bias.”
Joydeep Sen, corporate trainer, author and columnist believes that MFDs should tackle confirmation bias with facts and figures. He said, “MFDs should show their own investment portfolios to gain clients trust. They should highlight their learnings over the years and admit any mistake if they did in the past due to behavioral bias.”
Mumbai MFD Mukund Seshadri of MS Ventures is of the opinion that it is important to back all the evaluations with strong data points and show your clients both sides of the coin. MFDs should tell their clients about the confirmation bias and insist on them to look at risks along with the opportunities, he added.
Utkarsh Dubey of Finomatic Fintech Services, Kolkata said that MFDs should be neutral and give equal weightage to all the findings of investors. He said, “MFDs should listen to clients first. They should be open to explore what client says. Based on your findings, give them an analytical report and let them take a call.”
Here is the gist of solution:
- Ask questions and counter clients with facts and figures
- Show your own investment portfolio and admit if you made such a mistake in the past
- Show them both sides of the coin i.e. insist them to look at opportunities as well as risks
- Give analytical report on their bias and let them take a call
