Thorsten Hens, Enrico De Giorgi, and Kremena Bachmann's guide to applying behavioral finance insights to private banking and wealth management.
Behavioral Finance for Private Banking bridges the gap between academic behavioral finance research and practical wealth management. The second edition (2018) combines psychology, neuroscience, and decision theory to help financial advisors understand why their clients make irrational money decisions and what to do about it.
The book covers behavioral biases (the mental shortcuts that lead investors astray), cultural differences in investor behavior, neurological foundations of financial decision-making, and diagnostic tools for assessing investment personality. It then builds on prospect theory to show how portfolios, products, and advisory processes should be designed differently when you account for how people actually behave rather than how economists assume they behave.
This is for wealth managers, private bankers, financial advisors, and self-directed investors who want a research-backed understanding of investor psychology. The book offers practical frameworks for risk profiling, life-cycle planning, dynamic asset allocation, and structuring the entire wealth management process around behavioral finance principles.
Published by John Wiley and Sons as part of the Wiley Finance series, it draws on research from the University of Zurich and University of St. Gallen, making it one of the most comprehensive resources connecting behavioral finance theory to private banking practice.
So I just finished reading “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann. Second edition, published by Wiley in 2018. ISBN: 9781119453703.
This is a retelling of Chapter 1 (Introduction) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
Chapter 2 of “Behavioral Finance for Private Banking” is where the book gets really practical. This is where Hens, De Giorgi, and Bachmann lay out the specific mental traps that mess up our investment decisions. And there are a lot of them.
This is a retelling of Chapter 2 (second half) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
Traditional finance has this idea that money is the great equalizer. Doesn’t matter if you’re from Japan or Nigeria or Norway. We all want the same thing: good returns, low risk. Press a few buttons, buy some stocks, done.
Chapter 4 of “Behavioral Finance for Private Banking” is short but it hits hard. It asks one simple question: what is actually happening inside your brain when you make money decisions?
This is a retelling of Chapter 5 (Diagnostic Tests for Investment Personality) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
This is a retelling of Chapter 6 Part 1 (sections 6.1 through 6.6) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
This is a retelling of Chapter 6, Part 2 (sections 6.7-6.9) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
Chapter 7 of “Behavioral Finance for Private Banking” is about structured products. If you’ve never heard of them, don’t worry. Most people haven’t. But by the end of 2007, there were more than 340 billion Swiss francs invested in them in Switzerland alone. That’s 6.5% of all assets under management. Over 20,000 different structured products listed on the Swiss stock exchange.
So you picked your ideal portfolio. Good stocks, some bonds, maybe real estate. Everything is balanced perfectly. Now what? Do you just sit there and never touch it again?
You’ve probably heard the standard advice. When you’re young, put your money in stocks. As you get older, shift to bonds. Simple. Clean. Fits on a napkin.
Chapter 10 of “Behavioral Finance for Private Banking” is where everything from the earlier chapters comes together. All the biases, prospect theory, loss aversion, mental accounting, it all converges here. Into one practical question: how do you figure out how much risk a client can actually handle?
Here’s a question most people never think about. When you walk into a private bank and sit down with an advisor, what exactly is the process? Is there even a process? Or does the advisor just pick investments based on their own favorites and hope for the best?
This is a retelling of Chapter 12 (Fintech) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
Theory is nice. But does behavioral finance actually work when real people sit across from real bankers with real money on the table?
This is a retelling of Chapter 14 (Conclusions) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
So we made it. 17 posts later, and we’ve covered the entire “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann. That was a lot of ground.