The Advisor Institute: Coach's Corner
Which news and which opinions?

Practical messages intended to help you elevate the success of your practice.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

  • All Posts
  • More
      The article below is presented as a single post. Click here to view all posts.

      By David GordonDirector, Eaton Vance Advisor Institute

      Of all the behavioral biases that affect investors and advisors, perhaps none is more difficult to illuminate than confirmation bias. We all have a tendency to accept and celebrate information that supports our position or belief, while ignoring or discounting information that challenges our position or belief.

      The coronavirus pandemic has forced advisors and investors to spend more time at home. As a result, a natural inclination for many people has been to consume more news, opinion and social media. Adding economic uncertainty and civil unrest to the event mix only increases people's appetite for news and opinion.

      Ask yourself a question: If your news consumption time quadrupled, say, from 30 minutes a day to two hours a day, would you use the extra time to:

      a) Explore other sources?

      b) Consume more news from the same source?

      We could ask a similar question about increased social media consumption. Do you use your additional consumption time to:

      a) Explore differing viewpoints?

      b) Look for agreement or confirmation?

      We all want to be "right," and finding information that confirms our position helps us feel vindicated in our beliefs about ourselves, events, issues and markets. It can be comfortable in an echo chamber, but it can also be deceptive and polarizing. Investors may act on what they believe is a preponderance of evidence, when what they actually have is repetition of incomplete information.

      How can you help? We encourage you to broaden your consumption rather than deepening it. Consult news sources you might not have previously. Question assumptions, test theses and consider alternative scenarios — then communicate this broader understanding to clients. Invite them to step outside their own echo chamber.

      Bottom line: The best defense against the perils of confirmation bias is broad research from diverse sources.