Investment and Risk Tolerance

1583 Words Feb 5th, 2013 7 Pages
Hello Wallet Case

GIIM 636

Question 1: How do the concepts of behavioral finance create opportunities for HelloWallet?

The current financial advising sites such as HelloWallet as well as its competitors, such as Mint.com and Yodlee, provide budget and virtual financial advising service based purely on user bank transactions and spending category. The HelloWallet system allows the user to create and track customized budget plan. What is more important is that the system can automatically provide financial advice and saving tips by using data mining techniques.

However, HelloWallet and its competitors do not provide any financial analysis and evaluation based on user behavior and their psychographic characteristics, such as user
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Another advantage and opportunity for the HelloWallet is that behavior finance is a relatively new concept and traditional financial advisor feel uncomfortable to ask customer these psychological questions face to face. It is much easier for the user to interact with a computer to fill out the questionnaire. This will help to collect more accurate information to build solid virtual financial advisor-client relations which also benefit the HelloWallet business in the long term as clients are tend to stick to the same “advisor”(in our case a virtual financial advisor - HelloWallet) if she/he understands clients’ needs better.

Question 2: How do the concepts of behavioral finance create challenges for HelloWallet?

HelloWallet’s system creates customized budget plans for the users based on traditional finance and on trend analysis. This poses a challenge to HelloWallet because they do not incorporate the behavioral aspects of their clients. This will lead to creating recommendations that are not suitable to all their clients. Many models have been developed over the years to incorporate behavioral finance traits in the client’s portfolios. There are four different models that attempt to explain the behavior of individuals and their implications on
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