In the wake of Bernard Madoff and other financial-advisor scandals coming to light these days, people are understandably asking, Who can they trust for financial advice? Unfortunately, there’s no professional certification, credential, or academic pedigree that can really help consumers answer this question to full satisfaction.
So what else can you rely on? ”Intuition” or “gut instinct,” say some. But there are perils here, too, as some recent research suggests about what kind of advice sells. In “Humans Prefer Cockiness to Expertise,” the New Scientist reports:
The research, by Don Moore of Carnegie Mellon University in Pittsburgh, Pennsylvania, shows that we prefer advice from a confident source, even to the point that we are willing to forgive a poor track record. Moore argues that in competitive situations, this can drive those offering advice to increasingly exaggerate how sure they are. And it spells bad news for scientists who try to be honest about gaps in their knowledge.
It spells bad news, too, for our efforts to rely on instinct or intuition when attempting to assess the quality of financial advice. What we perceive as a “good feeling about someone” may merely be our “bias for confidence” masquerading as a weightier insight.
Hat tip to Abnormal Returns for the New Scientist article.
{ 0 comments… add one now }