On September 2, TD Bank Group and U of T’s Behavioural Economics in Action at Rotman (BEAR) announced that they had renewed their partnership, which was first established in October 2018.
The collaboration applies behavioural finance research to create practical knowledge in the areas of consumer welfare, private enterprise, and economic policy.
Psychology and spending
Behavioural economics has recently been in the spotlight, with Richard Thaler of the University of Chicago winning the 2017 Nobel Memorial Prizein Economic Sciences for developments in the field.
Whereas traditional economics assumes impeccable rationality and self-interested actors, behavioural economics takes a more pragmatic approach. It takes into account temporal and contextual perceptions, as well as the psychology of money, when evaluating decision-making trends.
“One of the foundations of the work at BEAR is that rather than creating knowledge merely in labs and university spaces, we strive to create practical relevant knowledge with our many partners in the areas of consumer welfare, for profit enterprise and policy,” Professor Dilip Soman, Canada Research Chair in Behavioural Science and Economics and Director of BEAR, wrote in an email to The Varsity.
BEAR researches, TD applies
Through the BEAR-TD partnership, TD employs BEAR’s research to account for clients’ financial blind spots. This would maximize long-term investment results of clients.
In an interview with TD’s MoneyTalk, Lisa Brenneman, Head of Behavioural Finance at TD Wealth — the arm of TD that provides financial planning and wealth management services — said that the bank has been applying behavioural finance to “real-life interactions” in order to help clients improve on their returns.
The benefits to TD of this partnership are not limited to direct financial gains. “TDWealth has had a lot of success in various domains in making their processes more efficient as a result of our work,” Soman wrote. “They have improved communications with clients, figured out how to digitally transform processes keeping the end user in
mind, and optimized and customized marketing messages.”
In her MoneyTalk interview, Brenneman further reiterated that the application of behavioural science and finance has helped TD’s advisors better understand the monetary needs of their clients.
A mutually beneficial partnership
BEAR’s mission is to conduct and bridge academic research and field application. While the partnership’s benefits to TD are evident, Soman pointed out that the agreement is a two-way street.
“First, we have access to real world problems, datasets and access to experts as we try and develop our own research agenda of trying to better understand how behavioural science can help organizations,” wrote Soman.
“Second, we can create unparalleled training and project opportunities for both our graduate and undergraduate students.”
The application of behavioural economics as a tool to leverage research and maximize gains is on the
rise. While much of TD and BEAR’s collaborative work has revolved around TD Wealth, Soman indicated that other branches of the bank have expressed interest in applying behavioural finance research as well.
“Over time, I’d love for us to explore bigger, enterprise-wide questions,” wrote Soman. “I’m also optimistic that we will be able to address bigger research questions that improve end-user welfare – how can we help customers make better choices; improve transparency; simplify a complex financial landscape and overall improve welfare.”
“I think both parties can reaffirm that the most relevant knowledge is co-created by academics in tandem with practitioners, and the continued partnership is testimony to the richness of the outputs!” Soman continued.
As the TD-BEAR partnership develops an experimentation- and empirical-based approach to decision-making, it continues to apply academic findings to rectify practical problems.