Chapter 8 — Psychology of Financial Planning

Domain Weight: 5% (~8-9 questions) Folder: Chapter 8 - Psychology of Financial Planning/

| File | Topic | Key Concepts | |---|---|---| | 8.1 - Behavioral Finance and Client Communication.md | Behavioral biases, prospect theory, nudge theory, counseling, life events | Loss aversion, System 1/2, anchoring, auto-enrollment, money scripts, crisis response |

Core competencies this chapter builds:

• Apply prospect theory and the two systems of thinking to client behavior
• Identify cognitive and emotional biases and their financial planning consequences
• Recommend nudge theory applications (automatic enrollment, defaults, SMarT)
• Use appropriate counseling techniques (active listening, open vs. closed questions, reflective listening)
• Apply appropriate advisor responses to major life events: death, divorce, job loss, sudden wealth
• Recognize when to refer clients to mental health professionals
• Understand money scripts and their influence on financial behavior

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