New research from FP Canada – funded by the FP Canada Research Foundation and conducted by HEC Montréal – has, perhaps not surprisingly, found that planers are more likely to recommend products after clients have inquired about them and they are more likely to recommend products if they own them, themselves, if their spouses own the investments or if they are licensed to sell the product.
FP Canada says being aware of this bias and others can increase the likelihood that recommendations will have favourable outcomes for clients.
“Financial planners, like all human beings, bring their own backgrounds and tendencies to the decision-making process,” they write. “The question is, what impact are bias and human tendencies having on the financial planning recommendations consumers receive?”
Notably, the research also found that planners will assign importance to a client’s gender, even when it isn’t relevant to the recommendation: four per cent were less likely to recommend mutual funds to female clients as compared to male clients.
The field experiment conducted by HEC Montréal presented client vignettes alongside responses phrased as recommendations. It was completed by 1,044 financial planners across Canada.
“Our experiment is centred on eliciting planner recommendations over different options for different client scenarios,” they write, adding that these focused on retirement savings, annuities, long-term care risk and investing decisions.
“This research is a reminder that all individuals are prone to bias, even financial planners,” says Joan Yudelson, executive director with the FP Canada Research Foundation. “It’s not necessarily a negative thing, but it does mean planners should remain vigilant.”