Assignment task: For your one (1) chosen scenario:
(a) Identify the key behavioural finance issue presented in this scenario. Include in your response a brief definition of the issue.
(b) Provide evidence from the scenario to support your assessment.
(c) Discuss the consequences of the impact of this issue in the context of the scenario provided if the issue is not identified and addressed appropriately.
(d) Based on the scenario, identify how the issue impacts either the giving or receipt of information. For example, what type of information is likely to be provided to investors in the scenario by the adviser, or what type of information would help the client in the scenario.
Scenario Chosen:
Sally is reviewing her client Rosey's portfolio and her ability to meet her retirement and lifestyle objectives. This is in response to Rosey raising her concerns with Sally after a period of increased market volatility. Sally presents two key options to Rosey, based on her previous risk tolerance assessment and understanding of her retirement goals. One option means that Rosey needs to alter her portfolio to a growth portfolio with a 70% exposure to shares that would allow her to retire at her desired age of 62, on her desired income level of $50,000 per annum. The other option suggests that she retain her existing portfolio mix which represents a more balanced approach, however this would mean that she would have to work 5 years longer than she would prefer. Rosey chooses to maintain her current investments 'as it gives her more certainty'.