Two Golden Gate University professors, Dave Yeske and Elissa Buie were part of a slew of respected academics who contributed to the book “Investor Behavior: The Psychology of Financial Planning and Investing.” The book sets forth to answer the question of why investors behave as they do. Edited by H. Kent Baker and Victor Ricciardi, “Investing Behavior” was published by Wiley Finance.
In 30-chapters, the book covers the bases of investor psychology and describes how personality, emotions, financial planning strategies and the behavioral underpinnings of various trading and investment topics help explain how clients make decisions.
The two GGU professor contributed a portion titled “Policy-Based Financial Planning: Decision Rules for a Changing World,” describing the concept as follows:
“Although the field of behavioral finance helps to provide a deeper understanding of the cognitive biases present when individuals make financial decisions, practitioners need not only understanding but also practical tools. Policy-based financial planning is one such tool, offering a framework and approach that allows practitioners to craft decision rules that can keep clients committed to a consistent course of action in a seemingly chaotic and unpredictable world. . . . These comprehensive yet compact decision rules serve as a touchstone for both client and advisor, providing clear guidance in the face of rapidly changing external circumstances. In their ideal form, financial planning policies are both broad enough to encompass virtually any external change and specific enough to return clear answers as to appropriate action.”
Buie and Yeske have been writing and speaking on the topic of Policy-Based Financial Planning since 2006, after their article “Policy-Based Financial Planning Provides Touchstone in a Turbulent World” was published in The Journal of Financial Planning.