What is a Behavioral Financial Advisor (BFA)?

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    A Behavioral Financial Advisor (BFA) is a financial advisor who goes beyond asset selection and offers practical advice to positively impact the saving and spending habits of their clients. This individual is motivated to develop a financial plan and grow their client’s portfolio through close attention to behavioral finance and investment products.

    This article will describe the Behavioral Financial Advisor (BFA) designation, why you should hire someone with the designation, and what it takes to earn and maintain the BFA designation.

    What is a Behavioral Financial Advisor (BFA)?

    The practice of behavioral finance aims to identify the psychological factors and inherent biases that influence an investor’s financial decisions.

    The general theory is that investments are not always driven by rational decision-making, but also by emotional decisions and mistakes. Financial advisors must understand each client’s unique perspective when it comes to money in order to create effective, long-term financial plans.

    Kaplan Financial has teamed up with consulting firm think2perform to create a BFA degree and encourage advanced financial advice. The designation focuses on behavioral finance training to identify emotional triggers and guide clients to improve their relationship with money.

    According to Institute of Corporate FinanceSome biases lead to poor investment decisions, such as:

    • Self attribution: The tendency to attribute good results to good decisions and bad results to luck. For example, someone who started investing in April 2020 probably saw their portfolio doing well. This may be a factor in the market’s overall performance over the past two years, but emotional investors can attribute their success to their stock-picking skills. Those same investors may attribute the drop in their portfolios in 2022 to bad luck.
    • Herd mentality: This was highlighted during the 2020/21 meme promotion frenzy. Emotional investors tend to follow and copy what other investors do. It doesn’t always work out in their favor, as anyone who has continued to invest in GameStop can attest.
    • Confirm offset: Some investors tend to ignore information that does not match their prior beliefs, while irrationally believing information that does.
    • Familiarity bias: Prevents people from investing in unfamiliar companies or industries. This can lead to a poorly balanced portfolio.

    There are many other biases and emotionally driven mistakes that cause negative financial trends. The good news is that you can overcome this by working with a behavioral finance analyst to help you recognize these behavior patterns and plan against them.

    BFAs can use several techniques to help their clients succeed in growing their portfolios. This includes

    • Recognizing the difference between reflective and reflective decision making. Investors must reason and rely on logic to make smart decisions.
    • Preparing and teaching clients to make decisions and control destructive urges.

    How is the BFA different from other financial advisors?

    Advice and recommendations from a financial advisor are an important step in your financial planning. Financial advisors work with you to articulate your desired outcomes and then create a customized plan to achieve your financial goals. A financial plan designed for you is great, but traditional financial advice often stops at the numbers.

    As the name suggests, BFAs go further to offer value-added services by taking into account your behavior and emotional triggers around money. By understanding your relationship with money and investing, they can provide sound advice and create a plan that is more likely to pay off for you.

    Should you hire a professional with a BFA degree?

    One of the hardest parts of achieving long-term goals is managing your emotions and making the right decisions that align with your values. BFAs help clients understand how psychology and physiology can guide their emotional decision making. They provide their clients with the knowledge and skills necessary to make rational choices, regardless of whether they are experiencing positive or negative emotions at any given moment.

    If compulsive habits, biases, and mistakes are hurting your finances, it’s best to understand and be aware of them while working with BFA.

    Here some benefits you can expect:

    • Sure to survive periods of volatility,
    • Reduction in short-term or emotional decision-making,
    • A prioritized set of financial goals with identifiable indicators of progress and
    • Improving financial decision-making.

    What does it take to earn and maintain a BFA?

    A prospective BFA must complete the think2perform online program and pass a third-party exam to receive the designation.

    The program combines training in traditional financial planning with psychology and neuroscience. Courses take 20 to 30 hours and include case studies, videos, quizzes and exercises.

    Students must complete two courses:

    1. Tips for behavior and you – The course consists of basic concepts of financial planning and behavioral science.
    2. Behavioral tips and your customers – The course includes advanced tools, concepts and lessons to maximize portfolio growth by identifying habits, biases and emotional triggers.

    BFA applicants must complete the courses and pass the exam within 150 days of registration.

    The BFA exam is conducted online and contains 100 multiple-choice questions with two case studies. It tests applicants’ knowledge of the tools and concepts needed to incorporate behavioral finance advice into their portfolio. Candidates must score at least 80% in the exam as a passing grade for appointment.

    To maintain your BFA, you must complete a 20-hour continuing education (CE) course and pay $99 to renew every two years. In addition to think2perform sponsored content, appointees may earn continuing education credits by participating in CE requirements for other appointments.

    Featured Behavioral Financial Advisors on Wealthtender

    📍 Click on a pin on the map below to see BFA financial advisors who can work with you to develop a personalized financial plan.

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    About the author

    Ash and Pri

    Ash & Pri are the founders AshandPri.comwhere they empower readers to make smart money decisions in all aspects of life.

    After achieving their FIRE goals at age 30, they launched their blog business in late 2021 and quickly scaled it to generate steady income within months.

    You can find their expert financial advice and tips on sites like Forbes, GoBankingRates, Apartment Therapy, MSN and more.

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