Around the globe, the gradual move from defined benefit pensions to defined contribution pensions has increased the need for individual retirement planning. Examples of this include U.S. savings rates at historic lows, poor retirement prospects for citizens in developed countries, and the...

According to modern portfolio theory (MPT), rational market participants make most decisions and seek to be compensated for additional risk. However, investors sometimes behave irrationally owing to preconceived notions and biases based on past experience. Behavioral finance offers an...

As an area of behavioral finance, estate planning is less focused on systematic, cognitive errors than on a core, emotional ambivalence about mortality. The chapter explores the dynamics of the advisor–client relationship in financial planning and estate planning, as well as the emotional...

Evidence from the behavioral sciences, notably economics and psychology, has profoundly changed the way policymakers and practitioners present expert advice to consumers. This chapter examines the behavioral science evidence on financial advice and explores its implications for the financial...

This chapter focuses on the financial mindset and behaviors of Millennials, and how they interact with financial advisors. Millennials have surpassed Baby Boomers as the productive generation and are projected to be the wealthiest. At 80 million strong, millennials are poised to leave their...

This chapter examines the phenomenon of frequent stock trading. Specifically, it covers the ample research demonstrating the negative effects of frequent trading on investor returns, as well as several possible underlying causes for this irrational behavior. Possible causes of frequent trading...

This chapter takes an economic view of the investment behavior of high net worth individuals (HNWIs), including: the psychological aspects of private wealth and the practice of wealth management, the current trends affecting the players and markets, and empirical findings on wealth creation and...

In the oversight of most funds, the portfolio manager holds the key decision-making power. Often regarded as foundational to the investment process, a few select managers can attract billions of dollars from investors, giving the managers increased prominence, credibility, and compensation....

An increasing number of households use financial planners or advisors. This chapter provides insight into these professionals, their potential motivations, and their interactions with clients. The various regulatory regimes of financial planners and advisors are discussed, including the most...

This chapter assesses the behavior of corporate managers and boards of directors within the framework of agency theory, stewardship theory, and psychological biases. In agency theory, a chief executive officer (CEO) is motivated to act in his or her own best interests rather than those of...