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CFP - Steps in the Financial Planning Process > Psychology of Financial Planning Definitions > Flashcards

Psychology of Financial Planning Definitions Flashcards

(75 cards)

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1
Q

Anchoring

A

Relying heavily on initial information in decisions.

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2
Q

Availability Bias

A

Relying on recent information over all data.

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3
Q

Behavioral Finance

A

Study of psychology’s impact on financial decisions.

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4
Q

Belief Perseverance

A

Maintaining beliefs despite contrary evidence.

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5
Q

Choice Architecture

A

Presentation of options influencing client decisions.

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6
Q

Client Biases

A

Psychological tendencies affecting financial planning.

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7
Q

Cognitive Dissonance

A

Mental discomfort from conflicting beliefs or actions.

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8
Q

Confirmation Bias

A

Seeking information that supports existing beliefs.

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9
Q

Endowment Effect

A

Valuing owned assets higher than market value.

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10
Q

Emotional Bias

A

Decisions driven by emotions

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11
Q

Framing Effect

A

Decisions influenced by how information is presented.

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12
Q

Goal Setting

A

Defining SMART financial objectives for clients.

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13
Q

Heuristics

A

Mental shortcuts simplifying decision-making processes.

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14
Q

Hindsight Bias

A

Seeing events as predictable after they occur.

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15
Q

Mental Accounting

A

Categorizing money based on arbitrary distinctions.

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16
Q

Overconfidence

A

Overestimating one’s knowledge or skills.

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17
Q

Present Bias

A

Prioritizing immediate rewards over future benefits.

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18
Q

Prospect Theory

A

Losses felt more strongly than equivalent gains.

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19
Q

Recency Bias

A

Undue weight given to recent events or trends.

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20
Q

Representativeness

A

Classifying based on superficial similarities.

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21
Q

Status Quo Bias

A

Preference for maintaining current conditions.

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22
Q

Sunk Cost Fallacy

A

Continuing based on past investments

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23
Q

Regret Aversion

A

Avoiding actions due to fear of future regret.

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24
Q

Financial Comfort Zone

A

Perceived equilibrium affecting risk tolerance.

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25
Financial Socialization
Learning financial norms from family influences.
26
Money Scripts
Deep-seated beliefs about money from early experiences.
27
Financial Status
Perceived financial position affecting behavior.
28
Subjective Financial Well-being
Personal perception of financial health and satisfaction.
29
Pathological Financial Behaviors
Dysfunctional behaviors needing behavioral intervention.
30
Nudging
Behavioral interventions designed to influence choices subtly
31
Mental Inertia
Resistance to change or adjustment in thinking
32
Checklist Strategy
A structured approach to decision-making that reduces biases by ensuring comprehensive evaluation of factors.
33
Financial Therapy
Combining financial advice with therapeutic practices to address emotional aspects of financial decision-making.
34
Psychological Barriers
Mental obstacles that impair rational financial decisions
35
Client Motivation
Understanding what drives clients to pursue their financial goals
36
Financial Transparency
The open and honest disclosure of one's finances
37
Conflict Resolution
Techniques and skills that financial planners use to identify and mediate client conflicts
38
Goal Congruence
Ensuring that clients have aligned financial goals
39
Financial Manipulation
The misuse of financial resources to exert control
40
Financial Enabling
Providing financial support in a way that hinders a person's ability to achieve financial independence
41
Financial Abuse
Exploiting someone financially
42
Financial Independence
A goal for many clients
43
Financial Alignment
Achieving consistency between a client's financial behaviors and stated goals
44
Emotional Finance
Recognizing that emotions influence financial decisions
45
Family Financial Dynamics
The study of how family roles and relationships affect financial decisions
46
Financial Infidelity
The act of concealing financial behaviors
47
Power Imbalance in Finances
The unequal influence one partner may hold over financial decisions
48
Trust in Financial Planning
Building credibility and benevolence trust with clients
49
Financial Goal Setting
The process of identifying and articulating clear financial objectives
50
Boundaries in Financial Relationships
Establishing clear
51
Money Conflicts
Disputes that arise between individuals or within families about financial matters
52
Financial Counseling
The process of guiding clients through their financial challenges and opportunities
53
Empathy
The skill of understanding and sharing the feelings of the client
54
Reflective Listening
A technique where the counselor listens actively and reflects back the client's statements to confirm understanding and encourage further sharing.
55
Financial Literacy
Knowledge and skills that enable clients to make informed financial decisions
56
Cognitive Behavioral Techniques
Techniques aimed at changing a client's thought patterns to influence financial behavior positively.
57
Trust
A core component in the client-advisor relationship
58
Client-Centered Approach
A counseling style that focuses on the client's perspectives
59
Communication Skills
The essential verbal and non-verbal skills required to convey information clearly and build rapport with clients.
60
Boundary Setting
Establishing professional boundaries that define the advisor's role and prevent overstepping into personal matters.
61
Professional Ethics
Adhering to ethical guidelines that ensure integrity and professionalism in client interactions.
62
Multifaceted Communication
The various strategies and techniques that financial planners can employ to effectively communicate with clients
63
Active Listening
A skill where financial planners fully engage with clients
64
Nonverbal Communication
Communication through body language
65
Sympathy vs. Empathy
Sympathy is feeling sorry for someone
66
Crisis Events
Situations that have severe financial and emotional consequences
67
Crisis Management
Techniques used to support clients through crises by reassessing financial goals
68
Emotional Intelligence
The ability to recognize
69
Triage Approach
In crisis situations
70
Trust and Credibility
Trust in financial planning is built on the planner's credibility (technical competence) and benevolence (acting in the client's best interest).
71
Benevolence Trust
The confidence clients have that their financial planner acts with their best interests in mind
72
Resilience Building
Strategies to help clients and planners build resilience to withstand future financial crises or stressors.
73
Cultural Awareness in Communication
Recognizing and respecting diverse cultural backgrounds in communication
74
Stress vs. Crisis
Differentiating between general stressors
75
Repairing Trust
Techniques to rebuild trust after it has been damaged

CFP - Steps in the Financial Planning Process (9 decks)

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