What is a BFA?

One of the limitations of using tested investment theory to provide people with rational financial advice is that people aren't necessarily all that rational. Investors tend to get worried when the market is down and sell cheap at the bottom, locking in losses. On the flip side, they tend to buy in at high prices when the market is rising, so the only way to record gains is if the market keeps going up. Financial advisors often are challenged to encourage clients to follow the rational course when emotions drive them otherwise. That’s where the behavioral finance advisor (BFA) accreditation comes in.

Behavioral finance recognizes that people are rarely entirely rational, are guided by feelings as well as facts, have limited self-control, may be subject to conscious and unconscious biases, as well as cognitive and information processing errors. To respond to the challenges that this complicated reality presents, Kaplan Financial and Think2Perform – a leadership consulting firm headquartered in Minneapolis, Minnesota – created the BFA designation. Think2Perform conceived the BFA as a way to indicate how advisors can go beyond a focus on investment products and more effectively influence the spending and saving behavior of clients. That, arguably, can be a bigger determinant of how well an investment portfolio performs than asset selection.

The overall goal of the BFA training is to equip advisors to be financial coaches who can help integrate the conventional financial knowledge about markets and investing they’ve acquired through experience or other education with findings from psychology and neuroscience. The aim is to improve the decisions made by their clients, and keep those decisions tracking more closely to the plan, by increasing their emotional competency in financial matters.

-Excerpt taken from a smartasset™ article written by Mark Henricks, February 27, 2021-