The behaviour of Australian financial planners

摘要

Behavioural finance literature argues that behavioural biases affect an individual’s decision making. This research delves deeper into such behavioural biases (also known as mental or psychological biases) and explores how individuals’ financial decisions are affected. Using surveys and quantitative models, this research aims to identify whether or not Australian financial planners are prone to behavioural biases. Financial planning can be defined as a strategy that helps an individual meet financial goals through streamlined channels of budgeting, risk profiling, gaining an understanding of personal needs and considering life’s priorities. Planning of finances has become an important aspect in today’s complex world where uncertainty is a part of life. This thesis attempts to increase academic and industry awareness of behavioural biases in the area of financial planning. When we combine the existing literature with recent events, such as advancements in industry regulations, changes in the Australian superannuation system, and the global financial crisis, a fertile research ground emerges which allows us to document new practices in financial planning. Data is collected through interviews with 10 financial planners and a survey of 162 Australian financial planners to document their approaches in regards to retirement planning, superannuation, insurance and investments. This research takes into consideration four behavioural biases: overconfidence, self-serving, loss aversion and representativeness. Understanding these biases and their implications in decision making in financial planning will have a direct impact on the advice that financial planners provide to their clients. This thesis also reports how fundamental factors such as gender, age, income, marital status, residency status, education and type of organisation play a pivotal role in the financial planning processes. It is also important to note that behavioural biases are not necessarily bad attributes to have since they have the potential to enhance decisions in certain areas. For instance, our results suggest that self-serving financial planners show a high preference for tax and property investments. This can be useful to their clients as they will be aware of the tax treatment on their investments and will also help to enhance property investments for clients. Similarly, loss aversion bias tends to have a high preference for insurance purchase. This reflects their awareness of risk and future uncertainties. Our findings are of great importance to the financial planning industry which caters to the financial needs of all Australians. Taking into account all of these factors, we propose a profile of a competent financial planner. Our results show that, regardless of fundamental characteristics and behavioural biases of financial planners, they tend to provide sound financial advice.