The role of trust in personal financial planning

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The behaviour of Australian financial planners

Chowk, G 2015, The behaviour of Australian financial planners, Doctor of Philosophy (PhD), Economics, Finance and Marketing, RMIT University.

Document type: Thesis
Collection: Theses

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Thesis

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TitleThe behaviour of Australian financial planners
Author(s) Chowk, G
Year2015
AbstractBehavioural finance literature argues that behavioural biases affect an individual’s decision making. This research delves deeper into such behavioural biases (also known as mental or psychological biases) and explores how individuals’ financial decisions are affected. Using surveys and quantitative models, this research aims to identify whether or not Australian financial planners are prone to behavioural biases. Financial planning can be defined as a strategy that helps an individual meet financial goals through streamlined channels of budgeting, risk profiling, gaining an understanding of personal needs and considering life’s priorities. Planning of finances has become an important aspect in today’s complex world where uncertainty is a part of life.

This thesis attempts to increase academic and industry awareness of behavioural biases in the area of financial planning. When we combine the existing literature with recent events, such as advancements in industry regulations, changes in the Australian superannuation system, and the global financial crisis, a fertile research ground emerges which allows us to document new practices in financial planning. Data is collected through interviews with 10 financial planners and a survey of 162 Australian financial planners to document their approaches in regards to retirement planning, superannuation, insurance and investments. This research takes into consideration four behavioural biases: overconfidence, self-serving, loss aversion and representativeness. Understanding these biases and their implications in decision making in financial planning will have a direct impact on the advice that financial planners provide to their clients. This thesis also reports how fundamental factors such as gender, age, income, marital status, residency status, education and type of organisation play a pivotal role in the financial planning processes.

It is also important to note that behavioural biases are not necessarily bad attributes to have since they have the potential to enhance decisions in certain areas. For instance, our results suggest that self-serving financial planners show a high preference for tax and property investments. This can be useful to their clients as they will be aware of the tax treatment on their investments and will also help to enhance property investments for clients. Similarly, loss aversion bias tends to have a high preference for insurance purchase. This reflects their awareness of risk and future uncertainties. Our findings are of great importance to the financial planning industry which caters to the financial needs of all Australians.

Taking into account all of these factors, we propose a profile of a competent financial planner. Our results show that, regardless of fundamental characteristics and behavioural biases of financial planners, they tend to provide sound financial advice.

DegreeDoctor of Philosophy (PhD)
InstitutionRMIT University
School, Department or Centre Economics, Finance and Marketing
Keyword(s) Australian Financial Planning
Retirement Planning
Superannuation
Insurance and Investments
Self-Serving Bias
Representativeness Bias
Loss Aversion Bias
Overconfidence Bias
Access Statistics: 260 Abstract Views, 223 File Downloads  – 
Detailed Statistics
Created:Fri, 14 Aug 2015, 12:17:05 EST
by Denise Paciocco

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    Towards responsible leadership in the financial planning industry in South Africa


    Saayman, Johannes Petrus (2016-12)


    Thesis (MA)–Stellenbosch University, 2016.


    Thesis

    ENGLISH ABSTRACT: The financial services industry in South Africa has, for some time now, seen sweeping changes take place. Many of these changes have been driven by the Legislatures. Similarly, financial products have undergone many changes, driven by both client-needs and technological advances.
    These changes have also influenced how businesses in financial services are managed and led. While leaders practice numerous leadership styles, this study will pay particular attention to contrasting leadership styles and comment on the ethical content of such styles, followed by a discussion on good leadership and responsible leadership.
    Two dimensions to responsible leadership are explored: the relational and the ethical. Within the relational dimension, this thesis will focus on the stakeholder-approach and the virtuous approach will enjoy focus within the ethical dimension. Weaving a web of inclusion among stakeholders is considered an essential ability for a responsible leader to have. Responsible leaders face many challenges. It is the responsible leader’s ability to build relationships that will allow the responsible leader to bring various stakeholders together and build enduring relationships with such stakeholders.
    The virtuous approach will be discussed from a virtue-ethics perspective and, as such, it is important to differentiate between values and virtues. The virtuous approach provides the responsible leader with a fixed point from which to make decisions. The cardinal virtues are discussed and used as the foundation to synergise the two approaches, i.e. the relational and virtuous approach. The two approaches are complementary and form the basis for moving the financial planning industry towards becoming a responsible industry.
    Heading towards responsible leadership in the financial planning industry in South Africa will not come without its own unique challenges. Understanding why leaders fail is important to ensure that safeguards can be put into place to prevent leadership failures. The challenges responsible leaders will face in the future will come from external as well as internal sources.
    However, the economic advantages and the impact responsible leaders can have on their organisations and society will far exceed any negative aspects brought about by the various challenges that responsible leaders face. It is envisaged that responsible leaders in the financial planning industry can have a marked impact on other leaders, be they business or societal.

    AFRIKAANSE OPSOMMING: Die Suid Afrikaanse finansiële dienste industrie, het oor die afgelope paar jare groot veranderinge beleef. Die veranderinge is onder andere deur wetlike aspekte beïnvloed. So ook, is finansiële produkte aangepas, om te voldoen aan kliënte behoeftes en tegnologiese ontwikkeling.
    Hierdie veranderinge het ‘n direkte impak op die bestuur en leiding van besighede in die finansiële dienste industrie. Alhoewel leiers gebruik maak van verskeie leierskap style, fokus hierdie studie op kontrasterende leierskap style as ook op die etiese inhoud van genoemde style. Gevolg deur ‘n bespreking oor goeie leierskap en verantwoordelike leierskap.
    Twee dimensies van verantwoordelike leierskap word ondersoek: die etiese en relasionele. Die relasionele dimensie omvat die belanghebbende-benadering en die etiese dimensie sal deur die deugsaamheid benadering uitgelig word. Die samestelling van ‘n inklusiewe platvorm wat alle belanghebbendes is ‘n noodsaaklike eienskap van ‘n verantwoordelike leier. Die verantwoordelike leier beleef verskeie uitdagings. Die verantwoordelike leier se vermoë om suksesvolle verhoudings te kweek, sal bepaal of die verantwoordelike leier die verskeie belanghebbendes bymekaar kan bring as ook die suksesvolle ontwikkeling van blywende verhoudings met die betrokke belanghebbendes.
    Die deugsame benadering sal vanaf ‘n deugde-etiek perspektief bespreek word, dus is dit belangrik om te onderskei tussen waardes en deugde. Die deugsame benadering bied die verantwoordelike leier met ‘n vaste punt vanwaar besluite geneem kan word. Die kardinale deugde word bespreek en word gebruik as die grondslag om die twee benaderings te harmoniseer, met ander woorde die relasionele en deugsame benadering. Die twee benaderings is aanvullend en vorm dus die basis vir die manier waarop die finansiële beplanning bedryf kan beweeg in die rigting om as ‘n verantwoordelike bedryf beskou te word.
    Die skyf na verantwoordelike leierskap in die finansiële beplanning bedryf in Suid-Afrika sal nie teweeg gebring kan word sonder unieke uitdagings nie. Om te verstaan hoekom leiers faal is dit belangrik om te verseker dat veiligheidsmaatreëls in plek gestel kan word om leierskap mislukkings te voorkom. Die uitdagings wat verantwoordelike leiers in die gesig staar sal vanaf beide eksterne en interne bronne ontstaan.
    Die ekonomiese voordele en die impak wat verantwoordelike leiers kan hê op hul organisasies en die gemeenskap as ‘n geheel, sal enige negatiewe aspekte wat deur die verskillende uitdagind gebied word oorskry. Daar word beoog dat verantwoordelike leiers in die finansiële beplanning bedryf ‘n merkbare invloed op ander leiers kan hê, of dit nou in besigheid of die samelewing is.


    Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/100349

    saayman_towards_2016.pdf (1.349Mb)

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    • Masters Degrees (Philosophy) 142


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