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Q&A With Dr. Daniel Crosby, Behavioral Finance Expert and FinCon 14 Keynote Speaker



After five years of experience leading a TPA call center in North Carolina, Andrew decided to move west to explore parts unknown and follow his passion of helping others. Walking through the doors of Ubiquity Retirement + Savings, formerly The Online 401(k) for the first time, he knew he’d found something special. Continuing to delight clients and partners alike and 10 years later, Andrew has been able to develop new teams, co-found a non-profit of strategic alliances, co-produce a hard-hitting documentary about the looming retirement crisis, and still had time to spread the savings gospel far and wide. Using social media and actual media alike (Wall Street Journal, Fox Business, PlanSponsor, and more), you’ll find no one who likes talking retirement more than this guy!


September 15, 2015 at 10:00 am
Personal Finance


Our bags are packed, and we’re counting down the hours to FinCon 15. Soon we’ll join other finance enthusiasts, bloggers, and experts in Charlotte for a jam-packed conference that promises plenty of opportunities to meet new people and spread the gospel of proper planning for the Future You. If you’re not able to make it, we’ll be providing live updates from our Twitter feeds!

Before we head to the airport, we decided to check in with last year’s FinCon keynote speaker, Dr. Daniel Crosby, a psychologist, behavioral finance expert and author of Personal Benchmark: Integrating Behavioral Finance and Investment Management. Dr. Crosby’s discipline is one that affects each of us, especially when it comes to retirement planning. How, exactly, do our emotions, actions, and feelings influence our finances and decisions?

We appreciate Dr. Crosby taking time out of his busy schedule to answer a few questions and help us understand the link between mind and money a little better!


AM: Can you describe behavioral finance/your expertise in a few sentences?

DC: I work in a field called behavioral finance, which sits at the intersection of psychology and finance. Behavioral finance is all about humanizing the assumptions of classical finance. Rather than assuming that financial decision-making is executed by a bunch of hyper-rational automatons, I study the ways in which our human quirks impact how we think and act with respect to money. In particular, my interests are around measuring stock market sentiment and applying behavioral research to the investment process in practical ways.


AM: What are the most talked about areas of finance? The most controversial?

DC: Probably the biggest debates in my world center around the concept of market “efficiency.” An efficient market is one where asset prices reflect all extant knowledge, making it impossible for investors to meaningfully outperform a passive, buy and hold approach. An inefficient market is one where prices become dislocated from their intrinsic value because of behavioral factors like fear and greed. I’m a believer in market inefficiency, but have also seen enough to know that divergence from true value can only be taken advantage of in a systematic and disciplined way. My work is around helping investors to capture those inefficiencies for their own financial gain, but to do so in a way that is rigorous enough that you don’t give in to the tendency to panic and sell low that plagues most of us.


AM: How would you describe the current state of retirement? What will solve the looming retirement crisis?

DC: Retirement readiness is in shambles, there’s no other way to say it. Financial preparedness for retirement requires two things of people that they are just awful at psychologically: tolerating risk and delaying gratification. Delaying gratification means that you need to be putting away between 10 and 20 percent of your present earnings in service of a “future self” that is far less emotionally vivid than your “right now self.” Your “right now self” wants a nice house, a fast car, stylish clothes and the like. Well, the problem is that your future self wants all of those things as well, but tends to get crowded out by your immediate wants and needs. Whether it’s avoiding a donut in favor of vegetables or stashing money in lieu of spending it, putting off current pleasure for a nebulous future gain is nothing we do well as a human race.

The second piece is that we have to tolerate uncertainty and volatility in the form of making investments. Inflation has historically been right around 3 percent per year, which means that if your money is not invested, you are losing purchasing power each year it sits in cash. But investing means you are subject to the (sometimes nonsensical) highs and lows of markets and are at risk of your hard earned cash getting sawed in half as it did circa 2008. Unless you are extremely high-earning and disciplined about saving, you will never be able to retire without investing in “risk assets.” The combination of having to endure the pain of setting money aside and then seeing it fluctuate in value is a psychological gut punch that many investors are ill prepared for.


AM: What would your ideal retirement consist of?

DC: A large library, an endless supply of Coke Zero and my family close by.


AM: How can people learn more about you and your work?

DC: They can follow me on Twitter @incblot, check me out on LinkedIn, or just drop by my house for some good food and conversation. It’s the Southern way!