Loading…
Consider these statements. (i) Defaults strongly influence choices because many people do not actively choose. (ii) The 'house money effect' describes people taking more risk with gains or windfalls than with money they earned.
Both statements are true. Inertia makes defaults powerful (Kahneman 2012; Pompian 2012, on ASIC's Exam preparation guidance v6.0 reading list), and the house money effect, a form of mental accounting, leads people to treat windfalls or recent gains as 'free money' and take more risk with them (Barberis and Thaler, on the same list).
Both describe real effects that advisers see often.
Practise more Consumer behaviour and decision making questions
Exam-style questions with worked answers, then full timed mocks. Free to start.
Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.
Start practising →Original practice material mapped to the learning outcomes in ASIC's exam guidance. Independent, not affiliated with or endorsed by ASIC. Verify figures and rules against current guidance before relying on them.