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Probability, Anchoring, and Imagining the Future

Lots of people seemed to assume that a 70% chance of a Hilary Clinton victory meant it was a certainty. I was certainly guilty of hoping for that. But as the statisticians and pollsters keep trying to tell us, what it meant was that if you ran the model ten times, Trump won in three of them. Today, that seems obvious, we live in one of the three futures. But it is always so much easier to spot in hindsight, or when we think 'other people' are anchoring around the 'wrong future', than it is when we are doing it ourselves. Take the Financial Advisers Act Review. 

It is more probable that the law will pass, than not. But what are your plans for 'not'?

MBIEs FAQ suggests that most AFAs will run FAFs and be FAs in their own firms, and most RFAs will become FAs in FAFs, or Agents in FAFs. In fact both groups has these options: 

  • Start a FAF and be an FA in it - along with hiring others, or soletrader version
  • Start a FAF and just manage it, hiring other FAs and Agents
  • Join a FAF as an FA
  • Join a FAF as an agent
  • Stop giving advice, and just sell with no advice - outside the regime
  • Quit selling financial products at all

It is a worthwhile activity to think about the different situations in which these options become more or less attractive to different groups. 

If you are still anchored on just one view of how the future will work out, and recent events haven't taught you not to do that, try some additional medicine at this link: a post by Seth Godin on the confusion about enough

 

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