White paper schwab evolving role 3600x1000

The Evolving Role of Behavioral Finance 2020

August 20, 2020

As market volatility escalated, advisors increasingly turned to behavioral finance to help keep clients invested and focused on their long-term goals.


Behavioral finance can play an important role in helping investors successfully pursue their financial goals, especially during periods of pronounced market volatility. This white paper examines the prevalence of emotional and cognitive biases with advisors’ client bases and the benefits of using behavioral finance as a tool to help minimize the biases’ impact.

Our Key Findings

  • Over the last year, advisors’ reported use of behavioral finance increased significantly, especially within client communications.
  • Advisors widely leveraged behavioral finance to help them develop a better understanding of clients’ actual appetites for risk and keep them invested during turbulent markets early in 2020.
  • Advisors’ clients most frequently demonstrated recency and loss aversion biases while instances of framing and mental accounting grew sharply in the last year.
  • Advisors who incorporate behavioral finance into their practices reported elevated client acquisition activity as they increased proactive client communication.

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