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2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Preeti Goyal ◽  
Poornima Gupta ◽  
Vanita Yadav

PurposeThe purpose of this paper is to explore how heuristics are formed and whether herding and prospect theory act as antecedents to heuristics. The relationship is explored specifically for millennials.Design/methodology/approachThe proposed relationship is explored specifically for millennials. Herding and prospect theory are modelled as antecedents to heuristics. The study uses survey data from 923 millennials from India to test the model for two financial products: equity and mutual funds. Regression analysis is used to evaluate the model.FindingsFindings support the role of herding and prospect theory as antecedents to heuristics of millennials although to varying degrees for equity and mutual fund investments. The impact of herding on heuristics is likely to be smaller for equity investments as compared to mutual fund investments.Research limitations/implicationsThe findings provide insights into how heuristics are formed for millennials. The findings add to literature by beginning a new line of inquiry on how heuristics are formed. Since the model is tested on a single generation, future research can test the model on other generations. In addition, future research can also add more antecedents to our proposed model.Practical implicationsFindings from this study can provide financial planners and marketers with an understanding of how heuristics are formed for millennials. Financial planners can use these insights while providing financial advice to this generation and marketers can use them to create more relevant outreach.Social implicationsFinancial investments are an important conduit for financial security. By understanding the cognitive processes that influence financial investment decision-making, it is possible for educators to create content appropriately and for financial planners to advise clients accordingly to enable optimal financial decisions that will be wealth-creating.Originality/valueExisting literature primarily treats heuristics, herding and prospect theory as being independent of each other. The authors take a novel approach to model the antecedents to heuristics to be herding and prospect theory. The model is tested on millennials for two financial products: equity and mutual funds.


Author(s):  
Bryan Teoh Phern Chern

The financial planning and advice industry has been experiencing healthy growth for the past five years and is expected to accelerate this growth following the Covid-19 pandemic (IBISWorld, 2021). The pandemic has led to higher equity yields and appreciating asset value, directly increasing the total value of assets under management (AUM) held by financial planners and advisors. The industry in the US alone has surpassed $52.9 billion in 2021. As the economy is expected to improve, this figure is expected to follow suit. Not included in these figures are the explosion of online personal finance bloggers and influencers. Some YouTube and TikTok videos have raked in billions of views regarding personal finance (Smith, 2021). Many of these online contents have benefitted viewers and prompted them to start making good decisions regarding their personal wealth, spreading financial literacy to the masses. However, poor financial advice may be spread out as easily to viewers. The Wall Street Journal has reported on this issue back in 2005 where blogs and magazines have been found to give both good and bad advice on budgeting, saving, and overall personal finance management (Cullen, 2005). Whatever the net effect of this phenomenon, the easy access through social media has amplified it. This article briefly journeys through the evolution of personal finance management and personal financial planning, including the new trends this industry is moving towards. Subsequently, this article will look into the risk and rewards of the current personal financial planning and advice industry, including certified financial planners and uncertified personnel (social media influencers, financial gurus), as to whether consumers are benefitting as a whole, or otherwise. A disclaimer to this research is that the findings and opinions towards the industry do not encompass all the service providers in the business as there are many other influencing factors such as business models, individual agenda, and unique circumstances of each provider and consumer. Keywords: Conflict of interest; financial planning; financial experts; Influencers; Personal finance


Author(s):  
Vivi Nur Arzy ◽  
Yeti Sumiyati

The principle of responsibility as one of the principles of GCG is reflected in the Company Law that every company may not carry out activities that are contrary to the law. This responsibility principle is also applied to companies engaged in the capital market. Financial planning companies are companies whose activities are connected to the capital market and can support the capital market. However, the regulations regarding financial planners have not been specifically regulated in statutory provisions. The existence of a legal vacuum regarding financial planners is used as an opening to commit violations by one of the financial planning companies so that it results in losses for consumers. This study used a normative juridical approach using a descriptive analytical research specification. The data collection technique used is through literature study using laws, books, journals and the internet related to the topic of the problem which will later be used as a reference for solving problems as part of data analysis. The analytical method used legal construction through the analogy method which is used to find specific provisions that become general provisions so that they can be applied to financial planning companies. The conclusions obtained from this research are: First, the regulation regarding financial planners in Indonesian laws and regulations has not been specifically and specifically regulated so that the existence of financial planners has not received legal certainty. Second, responsibility for financial planning companies providing investment programs that harm consumers can be subject to administrative, civil and criminal sanctions.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Daniel W. Richards ◽  
Maryam Safari

Purpose Scandals in the Australian financial services industry highlight the conflicts of interest between those who provide financial advice (financial planners) and their clients. Disclosure is a potential governance tool to manage these conflicts of interest by reducing asymmetries in information. Yet, the efficacy of disclosure is questionable as scandals persist, so this paper aims to research the effectiveness of disclosure in financial planning. Design/methodology/approach This research used a qualitative approach involving the triangulation of data from parliamentary inquiries in financial services with data collected in semi-structured interviews with financial planning professionals. Findings The findings draw a clear portrayal of the disclosure requirements and illustrate how disclosure processes are onerous and complex. Starting with detangling the complex interactions between the beneficial role of disclosure in reducing information asymmetry and unethical behaviour and the detrimental effect of information overload, the authors then highlight effective disclosure techniques used by financial planners, including visualisation of material information. The study reveals that financial planners perceive their role as filtering information for clients and ensuring clients’ comprehension, due to the onerous disclosure requirements. Research limitations/implications The study is of interest to researchers, practitioners, policymakers and society as it implies that how disclosure occurs is as important as what information is disclosed. Those who wish to foster effective disclosure in the financial services industry need to consider the quantity, quality and process of disclosure. A limitation is the research focusses on financial planning practices and not client outcomes, which could be considered in future research. Originality/value The study adds to the understanding of how disclosure is used as a governance tool and how the quantity of information may impede the effectiveness of disclosure in the financial planning industry. In addition, the study identifies and elaborates on the influential factors and best practices for enhancing the disclosure effectiveness by financial planners.


2021 ◽  
Vol 29 (02) ◽  
pp. 17-24
Author(s):  
Ramya K ◽  
◽  
Bhuvaneshwari D ◽  

This study aims to determine the cointegrating and causal relationship between Nifty 50 and Nifty sectoral indices. Historical index data of the select indices were collected from the National Stock Exchange (NSE) database for the period Jan 2014 - Dec 2018. Appropriate Econometric tools - Augmented Dickey-Fuller (ADF) test, Phillips and Perron (PP) test, regression model, Granger causality test, and Johansen cointegration test were used to analyze the data. The findings of the study imply that the movements of Nifty sectoral index prices could determine the flow of stock index prices, i.e., Nifty 50 and vice versa during the period of the study which could also help the policymakers and financial planners in providing financial awareness to investors and clients in decision making.


Author(s):  
Mohamad Raafat Elbardiny

The construction sector is large; it engages a variety of professions thus it is a main provider of employment and has a diverse market. The construction sector has a reputation for being conservative, problematic, and inefficient. This should change as we are moving toward industry 4.0 and smart cities that is injecting new tools and business dynamics. This chapter is trying to find methodologies to make an equilibrium between value produced by the contract, the flexibility of contract terms and contracting conditions thus contractors can be controlled in a reasonable matter. We are in here applying concepts and techniques from statics science and structural engineering to calculate PORD or PRCD (the Percentage Profit On Realistic Cashflow Duration) as a new financial modeling parameter that can help financial planners and decision makers to take more realistic decision. This parameter can be used jointly with other financial parameters such as ROI, IRR and NPV.


2020 ◽  
Vol 5 (2) ◽  
pp. 1-19
Author(s):  
Al-Hasan Al-Aidaros ◽  
Lina Nadhirah Abdul Hadi ◽  
Nor Aishah Hamdan

The purpose of this paper is to develop new instrument that measures the Islamic wealth planning concept based on the Islamic literature. The concept was conceptualized and transformed into an instrument based on two methods, namely experts’ validity (using Lawshe’s technique with eight Malaysian certified Islamic financial planners and two representatives from the official Islamic religious departments in Kedah and Perlis states/Malaysia) and focus group session with seven experts in several related areas, i.e. Islamic philosophy, Islamic finance, and Islamic financial planning. This paper used a quantitative approach using questionnaire. The developed instrument was then distributed to 120 respondents to further improve its validity and two analyses were performed: reliability analysis and exploratory factor analysis. The finding of this study is a new validated instrument for the concept of Islamic wealth planning which contains two main sections, i.e. worldly financial planning and hereafter financial planning. The first section consists of income/investment planning, retirement planning, education (for the individual) planning, and Takaful/insurance planning, while the second section consists of education (for his/her family) planning, Faraid planning, Wasiyyah planning, Zakat/taxes planning, Hajj planning, Hibah planning, Waqf planning, and charitable financial planning. This paper contributes to the existing scarce studies in the area of Islamic wealth planning and management. In addition, this study contributes in transforming the Islamic wealth planning concept into a measurable instrument that can be used for several parties such as Islamic financial planners, high net worth individuals (HNWI) as well as middle class individuals, Islamic financial institutions, and researchers. 


2020 ◽  
pp. 178-195
Author(s):  
Paul Weirich

Professionals, such as financial planners, may advise their clients or, with authorization, make decisions for their clients. A typical goal is an act that the client may perform if rational and informed. Mean-risk evaluation of acts assists a professional with this goal. Using it, a professional may evaluate an act by calculating for the client an informed attitude to the act’s risk and an informed attitude to the act’s consequences ignoring the act’s risk. In special cases, nonquantitative analogues of mean-risk evaluation apply. The method’s separation of probability assignments by a professional and utility assignments by a client does not create a separation of fact and value that neglects inductive risk.


2020 ◽  
Vol 15 (1) ◽  
pp. 115-126
Author(s):  
Manchanda Rimple

AbstractMoney Attitude determines the financial behavior of an individual. Both males and females are expected to demonstrate different money attitude due to difference in socialization and childhood orientations. This preliminary study attempts to determine the contrast in money attitude of males and females in Delhi and National Capital Region and present a comparative analysis in terms of their spending and saving habits. Data from 117 male respondents and 126 female respondents was collected. Money attitude was measured by adopting four sub-dimensions of Money Attitude Scale (MAS) developed by Yamauchi & Templer (1982). Descriptive analysis and independent t-test has been devised to test the dissimilarity in money attitude between male and female in Delhi NCR. The results bring about contrast across gender in terms of the four sub-dimensions of MAS. The research has implications for marketers, sociologist, economists, psychologists, and financial planners. The further research can be extended in terms of demographic factors.


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