Description: Behavioral Finance proposes that psychological and social factors influence financial and economic decisions, causing people to make decisions other than those predicted by conventional economics and which may not be optimal for them. This article strives to help defined benefit (DB) plan actuaries understand how concepts from behavioral finance may provide insight into the actions of the sponsors of defined benefit plans. We specifically explore how behavioral finance concepts may affect sponsors’ decisions regarding their plan’s preferred funding level and risk profile. Our hope is that actuaries can assist their clients in becoming aware of how these concepts may be affecting the quality of the sponsors’ decision-making process.

Description: Technological innovations are disrupting traditional business models, improving products, and enhancing the user experience.