Understanding Investor Behavior

Emotions, biases, and uncertainty can influence financial decision-making. Nearly half of people (49%) report feeling anxious or stressed when markets fluctuate or they feel uncertain about their financial future.[1] Advisors face an added difficulty—67% report that investors’ interpersonal and emotional dynamics make wealth transfer conversations challenging.[2]

As an Advisor, understanding investor behavior—and behavioral finance—can help you guide clients toward rational, goal-aligned financial decisions. Behavioral finance is an economic framework that links individuals’ irrational behavior to underlying psychological influences or biases.[3]

Common biases include:

Loss Aversion
Fearing losses more than valuing gains can lead to reluctance to rebalance portfolios, sell underperforming assets, or take calculated risks aligned with long-term goals. More than half (62%) of Advisors say this is the most common bias they experience with clients.[4]

Overconfidence
Experiencing success in business or investing can make clients overestimate their market knowledge, which can lead to concentrated positions or speculative decision-making.

Recency
Placing too much emphasis on recent experiences can negatively influence investment decisions, resulting in costly mistakes. Half of Advisors say recency is the second most common bias they experience with clients.[5]

Status Quo
Sticking with familiar strategies, Advisors, or asset allocations—regardless of potentially better opportunities—can lead to missed opportunities and could slow progress toward clients achieving their long-term financial goals.

The Emotion Behind Financial Decisions

Financial decisions are intertwined with identity, values, and a sense of security. For high-net-worth (HNW) clients, emotions can be amplified by:

• Complex wealth structures, including trusts, partnerships, and family offices
• Legacy considerations and multigenerational planning
• Public perception, reputation concerns, or scrutiny from stakeholders

Recognizing these emotional drivers enables Advisors to tailor conversations more effectively, suggesting recommendations that help resonate with rational and emotional priorities.

Applying Behavior Insights in Your Advisory Practice

While most Advisors (93%) believe clients trust their decisions, outside influences such as family and friends (85%) or social media (89%) are either somewhat or very influential on client behavior, creating a greater need for coaching.[6]

These competing influences can impact clients’ emotional response to market events. One third of people feel anxious or stressed when markets fluctuate or they feel uncertain about their financial future, and more than one third have made a financial decision—like pulling money out of a falling stock or not investing due to risk—out of fear.[7]

Recognizing these emotional and social pressures can help Advisors provide clients with structure and support to help them stay focused when markets or outside voices create doubt.

Some strategies include:

1. Structured Decision-Making - Implement pre-set rules for rebalancing, drawdowns, and portfolio adjustments to reduce emotional reactions.
   
   
2. Scenario Planning - Show clients multiple outcomes to temper overconfidence or recency bias.
   
   
3. Behavioral Coaching - Act as a sounding board and reality check, reminding clients about long-term objectives when markets become volatile.
   
   
4. Customized Communications - Match messaging to the client’s psychological profile, whether it’s data-driven explanations or more narrative explanations.

Enhancing the Client-Advisor Relationship

Understanding investor behavior benefits clients and their Advisors.

For clients, it can help them feel more understood and increase the likelihood of achieving their long-term goals. For Advisors, demonstrating empathy and insight can help strengthen trust and improve client retention.

Symmetry has tools and solutions designed to help support better client decisions. Contact us to learn more.

For Financial Professionals Only. Symmetry Partners, LLC (“Symmetry”) is an investment advisory firm registered with the Securities and Exchange Commission (SEC). The firm only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. No one should assume that future performance of any specific investment, investment strategy, product or non-investment-related content made reference to directly or indirectly in this material will be profitable. All data is from sources believed to be reliable but cannot be guaranteed or warranted. 

Symmetry provides this communication on this site as a matter of general information. Information contained herein, including data or statistics quoted, is from sources believed to be reliable but cannot be guaranteed or warranted. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. All content on this site is for educational purposes and should not be considered investment advice, recommendation, or offer of any security for sale. Symmetry does not provide tax or legal advice and nothing either stated or implied in this material should be inferred as providing such advice. Symmetry does not approve or endorse any third-party communications on this site and will not be liable for any such posts.

[1] Anantharajan, R.S., and Manasa, S., “Behavioural Finance and the Psychology of Investing,” International Journal of Financial Management and Economics, December 2024, https://www.theeconomicsjournal.com/article/view/438/7-2-127

[2] “Coaching Through Biases for Better Outcomes,” SEI, 2023, https://images.insight.seic.com/Web/SEIGlobalServicesInc/%7Bd8e19a04-b14b-457e-8698-70a6a24bc108%7D_AMD_CA_HF_2310_Coaching-Through-Biases-Advisor-Article.pdf

[3] Hayes, A., “Behavioral Finance: Biases, Emotions and Financial Behavior,” Investopedia, May 20, 2025, https://www.investopedia.com/terms/b/behavioralfinance.asp

[4] “Coaching Through Biases for Better Outcomes,” SEI, 2023, https://images.insight.seic.com/Web/SEIGlobalServicesInc/%7Bd8e19a04-b14b-457e-8698-70a6a24bc108%7D_AMD_CA_HF_2310_Coaching-Through-Biases-Advisor-Article.pdf

[5] “Tackling Common Behavioral Biases in Investing,” SEI, December 2023, https://www.seic.com/about-sei/thought-leadership/tackling-common-behavioral-biases-investing

[6] “Coaching Through Biases for Better Outcomes,” SEI, 2023, https://images.insight.seic.com/Web/SEIGlobalServicesInc/%7Bd8e19a04-b14b-457e-8698-70a6a24bc108%7D_AMD_CA_HF_2310_Coaching-Through-Biases-Advisor-Article.pdf

[7] Anantharajan, R.S., and Manasa, S., “Behavioural Finance and the Psychology of Investing,” International Journal of Financial Management and Economics, December 2024, https://www.theeconomicsjournal.com/article/view/438/7-2-127