On Topic Do You Use Behavioral Finance in Your Practice? Let us know your thoughts at magazine_editor@morningstar.com Whether we think about it consciously or unconsciously, I think we all use behavioral-finance techniques in our practices. A client may fill out a questionnaire to help us judge their risk tolerance, but it is only after a personal assessment do we learn what they really want. Even then, it’s not always accurate. Last year was a great year to learn about risk tolerances. Never did one think that the market could show so much risk. It is listening and getting to know the client that we get to uncover another layer of their personality and their expectations. Look at the inherent conflict of any client: not to lose money and make a lot of money. Trying to meet that expectation requires us to use behavioral-finance techniques, now more than ever. Mark Saran Raymond James Lake Forest, IL We use techniques to try to educate both ourselves and our clients about how our own behavioral instincts may create obstacles to our success as investors. Educating clients about these behavioral traps beforehand helps reduce the likelihood that we or our clients will act on our impulses and make the wrong decisions. It also makes us and our clients aware that these very same behavioral traps may push other investors to make the wrong decisions and provide an opportunity for us to capitalize on their mistakes. John Eckel Pinnacle Investment Management Simsbury, CT 12 Morningstar Advisor October/November 2009