Despite the better intentions of finance professors a generation ago, the market regularly fails the efficiency test. The scary reality is not a question of what degree of market inefficiency exists, it’s that market inefficiency exists at all. And that can harm investors.
Tag "investment"
Why are financial professionals more likely to embrace behavioral finance and how can this help the average investor?
Worse, those held accountable for the potential damage of the flaw are not these detached organizations, but the professionals implicitly promoting the festering error – regular people ranging from bank trustees hired to guard the interests of beneficiaries to retirement plan sponsors and trustees responsible for protecting their employees.
Each of these is dripping with overtones from the lessons of behavioral finance.
If you’re a plan sponsor, it’s time to review how your plan measures up against these design elements. If you’re looking to become a plan sponsor for a new plan, consider whether or not you should include these design elements.
Keeping the investment option menu simple not only increases the odds employees will retire in comfort, it also helps reduce fiduciary liability for plan sponsors.
Do you think the nature of those interests have changed since the plan was originally created? Has plan design changed accordingly?
It’s a sad world where “safety first” has the opposite effect.
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Fiduciary Facts, Fee Faux Pas and Ignorant Investing