Which biases are being exhibited by the client

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Described how should a financial advisor deal with and counsel the client who is looking at making sub-optimal finance decisions due to biases. Your role as a good financial advisor is to not let the client make such financial mistakes.

Situation 1

Your client is a salaried person with an annual income of INR 15 lacs and manages to save INR 5 lac every year after all expenses. After COVID and working from home, he has developed an interest in financial markets and invested some money in equity markets and made decent profits of around 50%. However, the client is also upset internally that he has missed out on the Bitcoin boom where the prices have increased 10x between March 2021 to October 2022. He is also an avid cricket fan and after seeing multiple advertisements about cryptocurrency during the T-20 World cup 2021, has become impatient and looking to park 50% of his monthly savings into bitcoin now. As a financial advisor, what will you advise the client? Which biases are being exhibited by the client?

Situation 2

Your client is employed in Amazon India with a good annual package consisting of ESOPs which have grown in value. Tasting success, your client is investing a large proportion of savings his savings into the stock of Amazon listed on the international stock exchange. As a financial advisor, what will you advise the client? Which biases are being exhibited by the client?

Reference no: EM133057030

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