Behavioral Finance for Private Banking, 2nd Edition

Behavioral Finance for Private Banking, 2nd Edition

by Kremena K. Bachmann, Enrico G. De Giorgi, Thorsten Hens
Released June 2018
Publisher(s): Wiley
ISBN: 9781119453703

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Book description

An essential framework for wealth management using behavioral finance

Behavioral Finance for Private Banking provides a complete framework for wealth management tailored to the unique needs of each client. Merging behavioral finance with private banking, this framework helps you gain a greater understanding of your client’s wants, needs, and perspectives to streamline the decision making process. Beginning with the theoretical foundations of investment decision making and behavioral biases, the discussion delves into cultural differences in global business and asset allocation over the life cycle of the investment to help you construct a wealth management strategy catered to each individual’s needs. This new second edition has been updated to include coverage of fintech and neurofinance, an extension of behavioral finance that is beginning to gain traction in the private banking space.

Working closely with clients entails deep interpersonal give and take. To be successful, private banking professionals must be as well-versed in behavioral psychology as they are in finance; this intersection is the heart of behavioral finance, and this book provides essential knowledge that can help you better serve your clients’ needs.

  • Understand the internal dialogue at work when investment decisions are made
  • Overcome the most common behavioral biases—and watch for your own
  • Learn how fintech and neurofinance impact all aspects of private banking
  • Set up a structured wealth management process that places the client’s needs front and center
Private banking clients demand more than just financial expertise. They want an advisor who truly understands their needs, and can develop and execute the kind of strategy that will help them achieve their goals. Behavioral Finance for Private Banking provides a complete framework alongside insightful discussion to help you become the solution your clients seek.

Table of contents

  1. Cover
  2. CHAPTER 1: Introduction
    1. NOTES
  3. CHAPTER 2: Behavioral Biases
    1. 2.1 INFORMATION SELECTION BIASES
    2. 2.2 INFORMATION PROCESSING BIASES
    3. 2.3 BIASES AFTER RECEIVING FEEDBACK
    4. 2.4 ARE MORE HEADS SMARTER THAN ONE?
    5. 2.5 SUMMARY OF BIASES
    6. 2.6 CONCLUSION
    7. NOTES
  4. CHAPTER 3: Cultural Differences in Investors' Behavior
    1. 3.1 WHAT IS FINANCIAL CULTURE?
    2. 3.2 THE INTRA STUDY
    3. 3.3 CONCLUSION
    4. NOTES
  5. CHAPTER 4: Neurological Foundations and Biases' Moderation
    1. 4.1 THE HUMAN BRAIN
    2. 4.2 INSIGHTS FOR BEHAVIORAL FINANCE
    3. 4.3 MODERATION OF BIASES
    4. 4.4 CONCLUSION
    5. NOTE
  6. CHAPTER 5: Diagnostic Tests for Investment Personality
    1. 5.1 A CASE STUDY
    2. 5.2 DESIGN OF DIAGNOSTIC QUESTIONNAIRES
    3. 5.3 KNOWLEDGE AND INVESTMENT EXPERIENCE
    4. 5.4 PSYCHOLOGY AND EMOTIONS
    5. 5.5 CLIENT'S DIAGNOSTIC PROFILE
    6. NOTES
  7. CHAPTER 6: Decision Theory
    1. 6.1 INTRODUCTION
    2. 6.2 A (VERY) SHORT HISTORY OF DECISION THEORY
    3. 6.3 EXPECTED UTILITY
    4. 6.4 MEAN‐VARIANCE ANALYSIS
    5. 6.5 PROSPECT THEORY
    6. 6.6 RATIONALITY OF MEAN‐VARIANCE AND PROSPECT THEORY
    7. 6.7 THE OPTIMAL ASSET ALLOCATION
    8. 6.8 COMPARING THE DECISION THEORIES
    9. 6.9 CONCLUSION
    10. NOTES
  8. CHAPTER 7: Product Design
    1. 7.1 INTRODUCTION
    2. 7.2 CASE STUDY
    3. 7.3 THEORY OF PRODUCT DESIGN
    4. 7.4 STRUCTURED PRODUCTS DESIGNED BY CUSTOMERS
    5. 7.5 CONCLUSION
    6. NOTES
  9. CHAPTER 8: Dynamic Asset Allocation
    1. 8.1 TIME DIVERSIFICATION
    2. 8.2 REBALANCING
    3. 8.3 CONCLUSION
    4. NOTES
  10. CHAPTER 9: Life‐Cycle Planning
    1. 9.1 CASE STUDY
    2. 9.2 CASE STUDY WERNER BRUNI
    3. 9.3 CONSUMPTION SMOOTHING
    4. 9.4 THE LIFE‐CYCLE HYPOTHESIS
    5. 9.5 THE BEHAVIORAL LIFE‐CYCLE HYPOTHESIS
    6. 9.6 CONCLUSION
    7. NOTES
  11. CHAPTER 10: Risk Profiling
    1. 10.1 RISK‐PROFILING METHODOLOGIES
    2. 10.2 COMPARING RISK‐PROFILING METHODOLOGIES
    3. 10.3 A CASE STUDY
    4. 10.4 THE RISK DIMENSIONS
    5. 10.5 BEHAVIORAL RISK PROFILER
    6. 10.6 RISK PROFILING AND ITS REGULATION
    7. 10.7 CONCLUSION
    8. NOTES
  12. CHAPTER 11: Structured Wealth Management Process
    1. 11.1 BENEFITS
    2. 11.2 IMPLEMENTATION
    3. 11.3 REGULATORY REQUIREMENTS
    4. 11.4 STRUCTURING THE WEALTH MANAGEMENT PROCESS
    5. 11.5 RELEVANCE OF DIFFERENT THEORIES
    6. 11.6 COMPLYING WITH THE REGULATORY REQUIREMENTS
    7. 11.7 INFORMATION TECHNOLOGY IN CLIENT ADVISORY SERVICES
    8. NOTES
  13. CHAPTER 12: Fintech
    1. 12.1 HISTORY OF FINTECH
    2. 12.2 CURRENT STATE OF FINTECH
    3. 12.3 ASSESSMENT OF FINTECH SOLUTIONS
    4. NOTE
  14. CHAPTER 13: Case Studies
    1. 13.1 CASE STUDY 1: STRUCTURED WEALTH MANAGEMENT
    2. 13.2 CASE STUDY 2: EXPERIENCE SAMPLING
    3. 13.3 CASE STUDY 3: GOAL‐BASED APPROACH
    4. NOTE
  15. CHAPTER 14: Conclusions
  16. CHAPTER 15: Appendix: Mathematical Arguments
    1. 15.1 PROOF THAT EXPECTED UTILITY SATISFIES THE AXIOMS OF RATIONAL CHOICE
    2. 15.2 DERIVATION OF THE FOURFOLD PATTERN OF RISK TAKING
    3. 15.3 MEAN‐VARIANCE AS A SPECIAL CASE OF PROSPECT THEORY
    4. 15.4 PROSPECT THEORY OPTIMAL ASSET ALLOCATION
    5. 15.5 NO TIME DIVERSIFICATION THEOREM
    6. NOTES
  17. References
  18. Index
  19. End User License Agreement

Product information

  • Title: Behavioral Finance for Private Banking, 2nd Edition
  • Author(s): Kremena K. Bachmann, Enrico G. De Giorgi, Thorsten Hens
  • Release date: June 2018
  • Publisher(s): Wiley
  • ISBN: 9781119453703