Confirmation Bias in Financial Planning

October 16, 2024

Confirmation bias is the tendency for people to seek out information or solutions that align with their existing beliefs, thoughts, or feelings when making decisions. It’s a cognitive shortcut our brains often take to process information more quickly and efficiently.

Though this sort of quick thinking can be time saving, it can also restrict our decision-making process, resulting in choices that are not fully thought out or appropriately challenged. The other potential problem with confirmation bias is that it happens unknowingly. So to challenge your own confirmation bias you need a level of personal awareness, a system of checks and balances and/or outside influences to help level your perspective. 

One aspect of life that is impacted by confirmation bias that you might not have previously considered in your finances. From smaller decisions like which brand of cereal you buy to larger ones like what you consider a good investment, how much of those choices is based on what you’ve always done or previously heard, and how much of those decisions come with the due diligence of why that choice is and is not the best one for you?

In this video, Julian Strauss looks at a specific example of how unconscious bias might impact your financial decisions and why taking the counter position helps bring clarity and encourage smart decision making. 

Working with an independent financial advisor can help you make decisions that are fully informed and thought out.

They do this by getting to know you and looking at the reasons why you are keen to make the decisions you are making with your finances. They bring not only the knowledge of financial planning to your meetings but they bring an understanding of what influences people to make the decisions they do. Through open communication and a fully collaborative process, our advisors can help you align your finances to what is important to you, working towards helping you achieve your goals. If you would like to have a free, initial consolation meeting please fill out the contact form below and a member of our team will be in touch. 

Bigmore - financial planning logo