Trends Report

Wealth Management Firms Should Infuse Behavioral Science Into Financial Experience Design

April 20th, 2020
Vijay Raghavan, Senior Analyst
Vijay Raghavan Senior Analyst
Aurelie L'Hostis, Principal Analyst
Aurelie L'Hostis Principal Analyst

Summary

Financial services firms should account for human psychology when designing their financial experiences; wealth management firms should infuse behavioral science into the fabric of their services to help investors make smarter investing decisions. Wealth management firms should build digital financial tools infused with behavioral science to provide an engaging, low-cost solution for the disengaged investor. Some fintech startups have started weaving the lessons of behavioral economics into the fabric of their services to help investors make smarter investing decisions: Micro-investing apps Acorns, Stash, And Moneybox help customers save and invest with automatic investing tools. Wealth management firms should use leverage customers’ loss aversion and help customers consider the opportunity cost when rebalancing their portfolio; Betterment shows investors tax impact previews to dissuade them from changing their portfolio’s allocation.

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