FPC007B Case study on behavioural finance

Introduction

Irrational investor behavior has always been linked to cognitive heuristics and biases, where new research suggests that emotions and feelings play a key role in investment decision-making. The authors investigate the link between investment decisions and three psychological factors: emotional intelligence, personality, and impulsiveness of different investors (Ishfaq, et al. 2020). Emotional intelligence (EI) is a quantifiable, measurable capacity, which is like the traditional intelligence, but it employs feelings, moods or emotions, in order to think effectively, rather than using data or information (Goleman, 2021). The main aim of this assignment is to identify the competencies and behavior that can support the ongoing client relationships, during the period of emotional anxiety and anger.

This assignment will focus on five areas, including:

• Daniel Goleman’s emotional intelligence competency framework
• Genos Model of Emotional Intelligence at workplace
• Communication Style
• Assessment of Clients and colleagues, based on Bias Identification Quiz and BIT Orientation Quiz
• Professional Development Plan

Discussion

Task 1 Case:

The case discussed in Task 1 was regarding the client engagement experience held between the financial advisor, Rebecca and her client, which was related to behavioral finance. The issue was created, as Investor felt scared and had lack of faith, in the financial advisor's judgement, due to a lack of understanding, familiarity, and confirmation bias. There was a lack of communication and understanding gap, as Investor had a unique situation, with varied ideas, risk capacities and judgments (prospect theory). The investor aimed to earn more, while taking less risk, which is nearly impossible. On the other hand, financial advisors displayed a confirmation and behavioral bias, presuming that investors don't mind earning less, as he requires no or lessor level of risk. This situation, caused a lot of friction within the organization, and ultimately, the advisory firm lost one of its old clients.

Based on the scenario/context discussed above, some of the similar examples have been observed in the group of people (work place colleagues). The financial advisor must be aware of the client's emotional intelligence. Therefore, Daniel Goleman presented that the abilities like self-awareness, self-control, and empathy are as important, as the intellectual qualities of a person (Goleman, Boyatzis, and McKee, 2013). Furthermore, people with lower emotional intelligence place a higher value on monetary gains, as compared to people, with higher emotional intelligence (Priolo et al. 2022). Also, people with higher emotional intelligence (EQ), reflect a balance of values (Giao et al. 2020).

Daniel Goleman’s emotional intelligence competency framework application on workplace examples

According to (Cherry, 2020), people that succeed at work are not only intelligent, but also have a high Emotional Intelligence or EQ. The emotional intelligence competency framework of Daniel Goleman is presented in Table 1:

(Source: Kaplan, 2019: Topic 2).

It is important for the people, to understand their own emotions, feelings. This helps people, to increase their ability to comprehend and rationalize emotions, which is especially useful for workplace, social relationships and making rational decisions (Cherry, 2020). Therefore, an observation was made, which analyzed behavior of two group of employees, based on the 5 competencies presented by the Goleman’s emotional competency framework:

Self- Awareness: Emotions and feelings are the key components of the EQ, therefore, it is very important to be self-aware. Based on interview and observation, one group of employees were self-aware, while the other group, was not.

Self-Regulated: According to observation, an employee of Group A was aware of his feeling, therefore, he was able to respond well to the situations and to socialize or criticize about what he felt. While, other group’s employee (Employee B) was unaware of her feelings, which resulted in her bad behavior or low esteem level.

Motivation: Employee A (group A) is observed to be highly motivated, and enjoyed his work, while Employee B (Group B) is found to be depressed, and likes structured or repetitive mature of work, which requires less creativity.

Empathy: Employee A is found to work with a team, having a group of sub-ordinates, and he tries to respond positively to their needs and ideas, While, Employee B does not believe in team work, and is always complaining about her sub-ordinates.

Social Skills: Employee A is a good manager, who has good communication and problem-solving skills, while Employee B is always isolated and does not like to communicate or engage with others.

Critical Evaluation:

Based on the observation results: Employee A took notice of impact of different influences and situations on his feelings and behavior, which made him self-aware. Also, Self-regulation helped to manage one's feelings, therefore, it is also very critical factor (Cheery, 2020). Employee A adopted many strategies to solve different problems and enhance efficiency levels of his team. This improved his communication with his supervisor and sub-ordinates. Also, this helped him to find ways to overcome/mange his feelings like: anger or annoyance. This also, increased his confidence level and he performed as a team player, where he focused on self-growth, as well his team’s growth. Also, motivation level is also found to be high in Employee a, where he is always ready for new projects and new challenges and acquired quick promotions. On the other hand, Employee B, was unaware of her feelings and therefore, did not know how to respond. This made her to remain tensed, angry, which also affected her social engagement skills. Also, she communicated less with others, due to her bad mood or anxiety and work stress. Social skills are highly important in a workplace; therefore, I analyzed my participants, according to this variable also. Where, Employee A had a large circle, while Employee B was isolated, and like being alone of attend solo projects. Therefore, she is not found to be a team player, problem solver or motivated to take challenging or new projects, which affected her success chances.

External Impact on Emotional Intelligence and strategies to capitalize opportunities and overcome threats:

Emotional intelligence (EQ) is now essential in order to be successful, as it is the ability to recognize, use, and control one's own emotions, in an effective way, in order to reduce work stress. Also, it helps to communicate effectively, understand others, overcome obstacles, and resolve conflict (Segal, et al. 2021). Therefore, EQ is found to be an essential trait required, to excel at work or in academic life.

Workplace environment has a significant impact on an employee's emotions, behavior and performance (Men, and Yue, C 2019). Job performance, decision-making skills, team-engagement, leadership roles, and employee absenteeism and turnover rates are all influenced by an employee's emotions and overall temperament at work (Bakker, Albrecht, and Leiter, 2011). In general, factors like: work culture, employee-employer relationship, work nature, employee engagement, profession nature, personal life, social life, communication patterns all impact the emotional intelligence of an employee.