Following up on our post about Jim Cramer’s stock tips, a new study suggests that the financial advice on shows like “Mad Money” may actually reduce activity in your brain:
Study participants were asked to make a series of financial choices between a guaranteed payment and a lottery while undergoing fMRI scanning. During portions of the testing, the participants had to make decisions on their own; during other portions, they received advice from a financial expert about which choice to make.
“Results showed that brain regions consistent with decision-making were active in participants when making choices on their own; however, there occurred an offloading of the decision-making process in the presence of expert advice,” says Jan B. Engelmann, PhD, Emory research fellow in the Department of Psychiatry and Behavioral Sciences, and first author of the study.
“The expert provided very conservative advice, which in our experiment did not lead to the highest earnings. But the brain activation results suggested that the offloading of decision making was driven by trust in the expert,” explains C. Monica Capra, PhD, an economist in the Department of Economics at Emory and coauthor of the study.
“This study indicates that the brain relinquishes responsibility when a trusted authority provides expertise, says Berns. “The problem with this tendency is that it can work to a person’s detriment if the trusted source turns out to be incompetent or corrupt.”
The lesson here is probably pretty simple: don’t blindly trust anyone, whether that’s a television stock market guru or a famous investment manager. Everyone’s financial situation is unique, and there’s no magical one-size-fits-all solution.
