The program’s two core components seek to educate advisers about the interplay between physiology and reasoning. The first Continuing Education course is titled “What Were They Thinking?” and uses behavioral finance concepts to help advisers understand and moderate client behavior. The second, “Building Better Portfolios: Portfolio allocations that help minimize irrational investor behavior,” builds on that knowledge and translates Behavioral Finance into practical ideas for allocations.
“Hard Wired” explains, for example, that in moments of severe stress (such as those caused by a market meltdown), the reasoning part of the brain may shut down in favor of a more immediate instinct towards survival. This kind of temporary block on logical functional may lead to emotional or irrational investment decisions.
The “Hard Wired” program includes:
- A client one-page summary on the three levels of brain function – reptilean, mammalian, and hominid – and how the brain functions under periods of stress.
- A client sheet that looks at redefining diversification, to include both normal and bear market performance.
- An Adviser Guide, with helpful information on how to recognize biases in clients, and how to reframe discussions with clients in order to move forward.
- A new thought paper, Defensive & Offensive Strategies to Help Minimize the Cycle of Emotional Investing, which helps advisers understand common investor behavioral biases to help their clients overcome them.
- A complete client seminar kit, including slides, script, invitation, prospecting material and client video.
Carey Foran Hoch, Senior Vice President and head of marketing for John Hancock Funds, said, “It helps advisers understand the connections between human biases and investment behavior, and apply that knowledge to their clients and their clients’ portfolios.” The program begins this month and with continue to run through the end of the year; it is available at www.jhfunds.com/behavioralfinance.