Financial Planning: Art or Science?

AdvisorOne - To many veteran planners, the recommendations of scientists don’t always seem that useful. Even if an advisor knows that a recommended strategy is theoretically optimal, that doesn’t necessarily mean a client is going to follow it. The right recommendation may be one that recognizes both the theoretical optimum and the behavioral idiosyncrasies of the client. Financial planner and Texas Tech University Adjunct Professor Harold Evensky developed the so-called two bucket strategy to help client’s maintain a scientifically optimal investment portfolio through the use of a behavioral trick—narrow framing.

In Leonardo da Vinci’s “Treatise on Painting,” he argued passionately that painting could be improved through a deeper awareness of scientific principles. Lifelike representations of the human form require a grasp of mathematics and optical principles such as geometry, proportion, shape, motion, distance and light. The value of this knowledge is obvious to anyone who compares a lifeless two-dimensional 15th century painting to any one of da Vinci’s 16th century

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To many veteran planners, the recommendations of scientists don’t always seem that useful. Even if an advisor knows that a recommended strategy is theoretically optimal, that doesn’t necessarily mean a client is going to follow it. The right recommendation may be one that recognizes both the theoretical optimum and the behavioral idiosyncrasies of the client. Financial planner and Texas Tech University Adjunct Professor Harold Evensky developed the so-called two bucket strategy to help client’s maintain a scientifically optimal investment portfolio through the use of a behavioral trick—narrow framing.

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