Adviser's alpha

Thanks Paul, Donald & Francis. I enjoyed your article. I have actually reviewed some of the same academic literature and come to some of the same conclusions in my forthcoming book: "Applying Behavioural Finance in Australia". My tilt is a little different to yours though. Rather than focus on the behavioural of the individual investor, I mostly focus on the behaviour of advisers, fund managers, super funds, etc.

In my view, individual investors' biases and value-destroying investment behaviours are increasingly well understood. But the industry that seeks to serve them is beset with a range of its own decision-making flaws and systematic distortions. Some are similar but some are quite different from what applies to individual investors. The financial impact of many of these biases can be quantified and is often material. Unfortunately most are hidden from our conscious awareness making overcoming them difficult. However, unless we can overcome these biases we will continue to struggle to help clients overcome their own.