CPWA Psychology of Financial
Decision Making & Family Wealth
Dynamics
Prospect theory effect – answer a natural tendency to feel more dissatisfaction from
losing a particular amount than satisfaction from gaining an equal amount, diminishing
sensitivity, what matters is perceived value
Representativeness Heuristics – answer Representativeness Heuristic - Belief that even
small samples should be representative of the population - People also think that the
recent past is indicative of the future • The Gambler's Fallacy says: - 5 "reds" in a row in
a fair game...black is due!
Representativeness - Gambler's Fallacy - Excessive Extrapolation - Regression to the
Mean
Regret Aversion - answerTaking action and losing feels worse than "doing nothing" and
losing • Although the outcome is the same, regret plays a larger role post-action - The
omission bias
Discounting Time Versus Money - answerFor time, individuals perceive more slack in
the future than in the present, creating high discount rates for time. • For money,
individuals perceive (relatively) more equal slack in future and in present (in absence of
life change), creating low discount rates for money. • Together, these predictions imply
that (hyperbolic) discounting should be more pronounced for decisions involving time
than money.
Only ____% of families sustain wealth beyond the shirtsleeves to shirtsleeves
conundrum. - answer10
Approximately _____ of family wealth is lost by the second generation. - answer70%
38% (the highest of any quadrant) of wealthy families communicate and frame wealth in
the following way: _______________________________. - answerlow support, high
control
14% (the lowest of any quadrant) of wealthy families communicate and frame wealth in
the following way: __________________________. - answerhigh support, low control
According to the financial, intellectual, social, and human capital model by Jay Hughes,
"governance" falls under which category? - answerintellectual
Decision Making & Family Wealth
Dynamics
Prospect theory effect – answer a natural tendency to feel more dissatisfaction from
losing a particular amount than satisfaction from gaining an equal amount, diminishing
sensitivity, what matters is perceived value
Representativeness Heuristics – answer Representativeness Heuristic - Belief that even
small samples should be representative of the population - People also think that the
recent past is indicative of the future • The Gambler's Fallacy says: - 5 "reds" in a row in
a fair game...black is due!
Representativeness - Gambler's Fallacy - Excessive Extrapolation - Regression to the
Mean
Regret Aversion - answerTaking action and losing feels worse than "doing nothing" and
losing • Although the outcome is the same, regret plays a larger role post-action - The
omission bias
Discounting Time Versus Money - answerFor time, individuals perceive more slack in
the future than in the present, creating high discount rates for time. • For money,
individuals perceive (relatively) more equal slack in future and in present (in absence of
life change), creating low discount rates for money. • Together, these predictions imply
that (hyperbolic) discounting should be more pronounced for decisions involving time
than money.
Only ____% of families sustain wealth beyond the shirtsleeves to shirtsleeves
conundrum. - answer10
Approximately _____ of family wealth is lost by the second generation. - answer70%
38% (the highest of any quadrant) of wealthy families communicate and frame wealth in
the following way: _______________________________. - answerlow support, high
control
14% (the lowest of any quadrant) of wealthy families communicate and frame wealth in
the following way: __________________________. - answerhigh support, low control
According to the financial, intellectual, social, and human capital model by Jay Hughes,
"governance" falls under which category? - answerintellectual
