Ethical Behavioral Finance: Not an Oxymoron for Retirement ... · Not an Oxymoron for Retirement...
Transcript of Ethical Behavioral Finance: Not an Oxymoron for Retirement ... · Not an Oxymoron for Retirement...
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Ethical Behavioral Finance:Not an Oxymoron for Retirement and Health Plans
Rick Storms, CEBSClient Services ManagerAlerusArden Hills, Minnesota
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For those so inclined, please download this App to your phone:
See important disclosures on the final page of this presentation.
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Behavioral Finance:
What Is behavioral finance are there Ethical considerations
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PEOPLE
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Behavioral Finance is about . . .
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See important disclosures on the final page of this presentation.
PEOPLE CONCEPTS
Behavioral Finance is about . . .
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Combines psychology with economics and looks at how emotional, social, and cognitive factors influence everyday decisions including financial ones.
Behavioral Finance: A Definition
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Status Quo/Subscription Bias
Choice Overload
Framing
Loss Aversion
Endorsement Effect
Immediacy Effect
Procrastination
Confirmation Bias
Social Norms
Heuristic Effect
Dramatic Effect
Present Bias
Serial Position Effect
Completion Effect
Story Telling
Other
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Behavioral Finance: Human Biases
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See important disclosures on the final page of this presentation.
Behavioral Finance is about . . .
PEOPLE CONCEPTS
ACTION
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Behavioral Finance
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An Absurdity Bias Example . . .
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Status Quo/Subscription Bias
Choice Overload
Framing
Loss Aversion
Endorsement Effect
Immediacy Effect
Procrastination
Confirmation Bias
Social Norms
Contagion heuristic
Dramatic Effect/ Absurdity Bias
Present Bias
Serial Position Effect
Completion Effect
Story Telling
Other
See important disclosures on the final page of this presentation.
Health and Welfare Behavioral Biases
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Dr. Volpp, University of Pennsylvania Smoking Study
Auto-Enrollment (Defaults)
Apps
Source: Dr. Dhruv Khullar, 2017See important disclosures on the final page of this presentation.
How Behavioral Finance Can Help Health
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Are You a Digital Fiduciary? Digital Resources Impact Decision Making Blank lines on a retirement plan website shape a participant’s
level of diversification.
Enhancing the design of an enrollment website can increase the number of workers who personalize their enrollment by 15% and can increase overall contributions by 10%.
Online enrollments give employers an opportunity to set higher default rates without reducing enrollment.
Source: Voya Behavioral Finance Institute for Innovation, 2019See important disclosures on the final page of this presentation.
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The Digital Fiduciary: What Do You Do?
Establish a Digital Policy Statement
Make The Right Thing Easy
Test and Retest
Source: Voya Behavioral Finance Institute for Innovation, 2019See important disclosures on the final page of this presentation.
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Behavioral Finance
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A Loss Aversion Example . . .
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For those so inclined, please download this App to your phone:
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Cost of Waiting Example for the Procrastinator:
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Behavioral Finance
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A Story Telling Example . . .
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See important disclosures on the final page of this presentation.
Behavioral Finance is about . . .
PEOPLE CONCEPTS
ACTION
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See important disclosures on the final page of this presentation.
Behavioral Finance is about . . .
PEOPLE CONCEPTS
ACTION ETHICS
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What Are Ethics?What is Trust?
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Defining Things Like Ethics, Trust, Moral Character, Etc., Is Not Easy . . .
So let’s look at a couple of definitions…
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What is Trust?
“Trust is a psychological state comprising the intention to accept vulnerability on positive expectations of the intentions of another”-Rousseau
Shaped by the characteristics of the trustor, trustee, and situation.*
Trust can be intrapersonal, interpersonal, institutional, or societal.*
Trustworthiness is based on perceptions of both competence and character.*
*Source: Brinsfield, University of St. Thomas, 2017 See important disclosures on the final page of this presentation.
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Ethics Definitions
Moral principles or rules of conduct recognized by an individual or group of individuals.
Rules of conduct that apply when an individual has to make a decision regarding moral principles.
The process of determining what are, and what are not, reasonable standards of moral conduct.
A process of resolving actual or potential conflicts of interest.
Source: Brinsfield, University of St. Thomas, 2017 See important disclosures on the final page of this presentation.
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Discussion scenarios
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Ethical Concerns With Behavioral Finance
Are there elements of Behavioral Finance that cause Ethicalconcerns for you?
Auto enrollment impact on lower paid people
Choice overload on retirement funds
Portfolio shifts within Target Date Funds
Loan features on retirement plans
Default elections on retirement plans
See important disclosures on the final page of this presentation.
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Ethical Concerns With Behavioral Finance
Are there elements of Behavioral Finance that cause Ethicalconcerns for you?
Selective Framing of choices on Medical Plans
Wellness incentive disparities
Prescription drug issues
Default elections on medical plans
Choice overload with Voluntary Benefits
See important disclosures on the final page of this presentation.
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Discussion/Q&A
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See important disclosures on the final page of this presentation.
Behavioral Finance is about . . .
PEOPLE CONCEPTS
ACTION ETHICS
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Thank you for attending!
WE WILL ALWAYS ACT IN THE BEST INTEREST OF OUR CUSTOMERS BY PROVIDING INNOVATIVE AND COMPREHENSIVE SOLUTIONS THAT ARE DELIVERED THROUGH RELATIONSHIP-ORIENTATED CONTACTS AND SUPPORTED BY USER-FRIENDLY TECHNOLOGY.
ALERUS RETIREMENT AND BENEFITS
Rick Storms, CEBS
This material is provided for informational and discussion purposes only. Trust and investment services are offered through Alerus Financial, N.A., which does not offer legal or tax advice. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues. Statements of fact are from sources considered reliable but no representation or warranty is made as to their completeness or accuracy. All material is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. The opinions presented in this communication are subject to change without notice.
Investment products: 1) are not FDIC insured 2) are not deposits or obligations of a bank and 3) involve investment risk, including possible loss of the principal amount invested.
© Richard Storms, 2019
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