In the financial industry, clients are attracted by confidence – if your conviction in a security or other investment is uncategorical, your advice will sound more convincing.
But is it possible the very presence of potential financial gain can lead us into deceptive realms that deprive us of our insight and wisdom? A recent academic study suggests that it may, a finding likely of interest to every financial advisory.
Researchers employed on the study found that some people can be too confident – unreflectively so, without self-examination. Everyone needs to gauge the reliability of their own opinions to determine if they’re being swayed by less-than-objective factors. Self-aware critical thinking is vital for successful action in every corner of life.
The study showed that when money is factored into measures of perception, some people become overly confident in the reliability of their own judgements. To state the case more precisely, money made some respondents more cautious, but for those who self-identified as being exceptionally capable, judgements became clouded when money was brought into the equation. The chance of gain apparently outweighed fears of potential loss. The thought of being such a person’s client might reasonably induce a case of the cold sweats.
The study is controversial to some observers and no final conclusions have been drawn from the data. It does raise a question, though: if a firm sets targets for employees that are linked to monetary rewards, how does this affect their judgement? Would they become more cautious so as not to blow their chances, or would they shoot the works? The client’s best interest can obviously become lost in such murk. This cooks up some food for thought, but perhaps underlines that human action can never be fully measured or quantified.
For more information, please read:
Money Can Worsen Our Judgment by Making Us Too Confident, New Study Shows | Newsweek