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FOR FINANCIAL ADVISORS
By Dr. David Edward Marcinko MBA MEd CMP™
SPONSOR: http://www.CertifiedMedicalPlanner.org
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Sensation, emotion and cognition work by Contrast Effect [cognitive bias].
Now, such perception is not only on an absolute scale, it also functions relative to prior stimuli. This is why room temperature water feels hot when experienced after being exposed to the cold. It is also why the cessation of negative emotions “feels” so good.
Cognitive bias functioning also works on this principle. So one’s ability to analyze information and draw conclusions is very much related to the context with in which the analysis takes place, and to what information was originally available. This is why it is so important to manage one’s own expectations as well as those of a financial advisor’s or stock broker’s clients.
For example, a client is much more likely to be satisfied with a 10% portfolio return if they were expecting 7% than if they were hoping for 15%.
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