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FP511 > Mod 2: Behavioral Finance, Communication, and Counseling Principles > Flashcards

Mod 2: Behavioral Finance, Communication, and Counseling Principles Flashcards

1
Q

Behavioral Finance, Communication, and Counseling Principles

Cognitive Error.

You believe you can control the outcome of an event when you cannot.

A

Illusion of Control

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2
Q

Behavioral Finance, Communication, and Counseling Principles

Cognitive Error.

You have a tendency to think one dollar has the same value today, tomorrow, and into the future, without considering inflation.

A

Money Illusion

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3
Q

Behavioral Finance, Communication, and Counseling Principles

Cognitive Error.

You initially form a rational view but fail to change that view as new information becomes available.

A

Conservatism Bias

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4
Q

Cognitive Error.

You have a selective memory of the past and have a tendency to remember your correct views and forget your errors.

A

Hindsight Bias

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5
Q

Cognitive Error.

You look for ways to justify your current beliefs.

A

Confirmation Bias

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6
Q

Cognitive Error.

When considering your choices in a decision, you tend to recall a past experience similar to the present decision-making situation, and assume one is like the other.

A

Representativeness

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7
Q

Cognitive Error.

You tend to place money into separate mental “accounts” based on the purpose of these accounts.

A

Mental Accounting

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8
Q

Cognitive Error.

You have conflicting attitudes, beliefs, or behaviors that cause a feeling of mental discomfort. This leads to changing some of your attitudes, beliefs, or behaviors to reduce your discomfort and feel more balanced.

A

Cognitive Dissonance

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9
Q

Cognitive Error.

You take credit for your successes and either blame others or external influences for your failures.

A

Self-attribution Bias

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10
Q

Cognitive Error.

You make irrational decisions based on information that should have no influence on the decisions at hand.

A

Anchoring and Adjustment

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11
Q

Cognitive Error.

You tend to take a course of action based on the outcomes of prior events, ignoring current conditions.

A

Outcome Bias

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12
Q

Cognitive Error.

You process and respond to information based on the manner in which it is presented.

A

Framing Bias

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13
Q

Cognitive Error.

You give recent information more importance because you remember it most distinctly.

A

Recency Bias

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14
Q

Emotional Bias.

You fear losses much more than you value gains, and you prefer avoiding losses to acquiring the same amount in gains.

A

Loss Aversion

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15
Q

Emotional Bias.

You believe that you control random events merely by acquiring more knowledge and consider your abilities to be much better than they are.

A

Overconfidence

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16
Q

Emotional Bias.

You lack self-discipline and favor immediate gratification over long-term goals.

A

Self-control Bias

17
Q

Emotional Bias.

You are comfortable with an existing situation, which leads to an unwillingness to make changes, even though the changes are beneficial.

A

Status Quo Bias

18
Q

Emotional Bias.

You think an asset you own is worth more than it is because it is yours.

A

Endowment Bias

19
Q

Emotional Bias.

You do nothing out of excess fear that your decisions or actions could be wrong.

A

Regret Aversion Bias

20
Q

Emotional Bias.

You make decisions based on how you believe the outcomes will represent your interests and values.

A

Affinity Bias

21
Q

The tradeoff that clients are willing to make between potential risks and rewards.

A

Risk Tolerance

22
Q

The client’s assessment of the magnitude of the risks being traded off.

A

Risk Perception

23
Q

The degree to which a clients’s financial resources can cushion risks.

A

Risk Capacity

24
Q

Clients with visual learning styles tend to respond to…

A

Visual objects, such as:

  • graphs
  • charts
  • pictures
  • reading information
25
Q

Clients with auditory learning styles retain information by…

A

Hearing or speaking.

26
Q

Clients with kinesthetic learning styles understand concepts better using…

A

A hands-on approach. For example, writing goals and objectives with bullet points as they are formulated.

27
Q

A process that helps clients change poor financial behavior through education and guidance.

A

Financial Counseling

28
Q

Reflect a person’s opinions, values, and wants

A

Attitudes

29
Q

Type of attitude because they reveal the understanding of some aspect of a person’s life.

A

Beliefs

30
Q

Attitudes and beliefs for which a person feels strongly

A

Values

31
Q

What is a client’s context composed of?

A

Past history or any conditions that presently exist

32
Q

What affects a client’s context?

A
  • Cultural Influences
  • Religious Preferences
  • Individual Family Circumstances
  • Age
  • Current Life Cycle Stage

FP511 (7 decks)

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