• Check your ego and take time to reflect. Are you overly invested in being right rather than discovering what you might have missed?
"The likelihood of making judgment errors increases if we neglect the impact that biases have on our own thinking," the report said. "This neglect can cause you to minimize important information or discount a client’s emotion as unimportant. While many behavioral biases are unconscious, being mindful that we’re all subject to them is a good place to start to help avoid them."
The research also found that, at least in the view of advisors, the biases of clients lean in a different direction.
Surveyed advisors said the most common client biases they see are overreaction (36%), when people are too influenced and give too much meaning to a past event; hindsight (22%), which refers to when people mistakenly believe they predicted a past event; and belief perseverance (19%), when people stick to their belief even when it is contradicted by new information.
The authors of the report noted that behavioral economists have long known that people don't always behave rationally when faced with certain market and economic events—and that irrational behavior played a role in the market crises of 2000 and 2008.
"Among the implications of this research is that, left unchecked, behavioral biases may cause us to make choices that lead to suboptimal financial outcomes," the report said.
The research was based on responses from 608 advisors in an April survey.