A financial adviser is in a meeting with one of his clients. The adviser is trying to
Question:
A financial adviser is in a meeting with one of his clients. The adviser is trying to convince the client that it is a good idea to invest some money in the stock market. Consider the following two statements:
a) "You'll save money by investing in the stock market. You can expect a higher rate of return, and you'll have more money when you retire."
b) "You're losing money by not investing in the stock market. Your friends and relatives who have invested in the stock market can expect a higher rate of return, and they will have more money when they retire. You will be left behind."
Which of the two statements would be more effective in getting the client to take action and why? Explain? Make sure that in your analysis you draw on the behavioural biases that we studied in the module
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta