PT - JOURNAL ARTICLE AU - Joachim Klement AU - Robin E. Miranda TI - Kicking the Habit: <em>How Experience Determines Financial Risk Preferences</em> AID - 10.3905/jwm.2012.15.2.010 DP - 2012 Jul 31 TA - The Journal of Wealth Management PG - 10--25 VI - 15 IP - 2 4099 - https://pm-research.com/content/15/2/10.short 4100 - https://pm-research.com/content/15/2/10.full AB - Conventional explanations for the diversity of risk preferences among individual investors offer only limited insight. Recent research in neuroscience, genetics, and behavioral decision making underscore the importance of experience in financial risk taking. The authors review these findings and argue that not only does individual experience influence risk taking; so do the collective experiences of groups. Additionally, there seems to be a significant genetic component to financial risk taking, suggesting that “evolutionary experience” also needs to be considered when analyzing the risk preferences of individual investors. The authors introduce some simple tools to identify the influence of experience on financial risk preferences. These tools can help financial advisors to accurately assess investors’ risk preferences to help them achieve their goals at an acceptable level of risk.TOPICS: Wealth management, risk management, in wealth management