The Sweeney Agency

About Michael Pompian - Expert on Behavioral Finance:

Michael Pompian is the Director of the Private Wealth Practice at Hammond Associates, an investment consulting firm serving institutional and private wealth clients.

Prior to joining Hammond Associates, he was a wealth management advisor with Merrill Lynch and PNC Private Bank, and served as an investment advisor to a family office. Pompian holds the Chartered Financial Analyst designation, and is a Certified Financial Planner, and a Certified Trust Financial Advisor. He is also a member of the CFA Institute (formerly AIMR) and the New York Society of Securities Analysts (NYSSA).

Michael holds a BS in management from the University of New Hampshire and an MBA in finance from Tulane University. Pompian is a regular speaker on the subject of behavioral finance and has published several articles on the subject.

What Michael Pompian Talks About:

Overview of Behavioral Finance
In this lecture, attendees will learn the basics of behavioral finance. This includes a discussion of both behavioral finance micro which is the study of the irrational behavior of individual investors and behavioral finance macro, the study of irrational markets. Also covered are the two great debates of behavioral finance: standard finance vs. behavioral finance and efficient markets vs. irrational markets. This discussion includes an in-depth look at homo economicus or rational economic man vs. behaviorally-biased man. If the audience includes financial advisors, there will also be a section on the role of behavioral finance with private clients and how practical application of behavioral finance can create a successful advisory relationship.

Practical Application of Behavioral Finance for Financial Advisors
Financial advisors often encounter irrational investor behavioral with their clients but are unsure of how to handle these often complex and difficult situations. One area of concern is answering the question: should advisors adapt their asset allocations to fit the behavioral profile of their clients or should the advisor attempt to change the behavior of their clients to match asset allocation recommendations? Also, how do financial advisors assess if a client has a standard of living risk and how should an investment program be structured to account for this risk? These key questions will be explored and answered in the form of three case studies.

Twenty of the most common irrational investor behaviors
Behavioral biases are the building blocks of the practical application of behavioral finance. In this lecture we cover the descriptions of twenty of the most common irrational investor behaviors along with example of each one. Also covered is how to differentiate between cognitive and emotional biases and advice is given on how to help investors deal with the consequences of having each one.

How to identify Behavioral Investor Types
To identify biases, there are two fundamental ways an advisor can approach the task: bottom-up or top-down. In Michael's book Behavioral Finance and Wealth Management, he describes a bottom-up approach which involves the identifying twenty individual biases, determining which biases dominate, and plotting this information on a chart to create the best practical allocation for the client.