Firstly, we would like to clarify that this does not refer to classical alpha. The goal is to help investors generate the returns already offered by the market, but that they currently do not take. Whether clients receive advice or not, behavioral biases often cause them to allocate assets in a way that underperforms the market. This is what the New York Times columnist Carl Richards calls the Behavior Gap. The goal of Yainvest is to debias investor decisions to reduce this gap. Studies show that such behavioral factors can range from 3 to 6%.

One recent study of Robinhood clients showed how the attention bias, or tendency to focus on attention-grabbing stocks, causes a 5% loss monthly. Similarly, a Berkeley analysis showed that the overconfidence bias can lead to excessive trading, causing annual losses of 3%.

The applications of Yainvest include the following:

• Design of savings & investments products:
  - UX nudging - for example, research suggests that people make decisions based on the value of losses or gains rather than the final outcome. Yainvest enables you to display this information in the UX to guide their decision.
  - Product design - for example, attempts to encourage people to save more towards retirement were largely unsuccessful until Richard Thaler and Shlomo Benartzi proposed Save More Tomorrow, a system where employees can opt in advance to gradually increase their savings rates over time.  
• Insights:
  Understand how capital market movements affect the price of financial instruments.
• Client profiling:
  By understanding a person’s behavioral characteristics in the context of financial services, you can design more personalized investment management products and make better asset allocation decisions.

Behavioral finance has shown that as humans, we are susceptible to biases which cause us to take decisions that are not in our economic self-interest. In investment scenarios in which we have limited mental capacity and are faced with complex information, we can be led astray in many ways. For example, we may succumb to the urge to cherry pick evidence to convince ourselves that we were “right all along” about our favorite stock — confirmation bias. Or we might continue to hold on to depreciating assets that have no realistic prospects of growing in value because we are unable to see past the initial price we paid — anchoring bias. Of course, these two highly simplified examples of cognitive biases are just a drop in the ocean: over the course of decades of research, over 150 others have been identified.

UI nudging is a design approach that seeks to subtly guide users towards better choices, without limiting their options. This may be achieved through the ordering, sizing, design and color of graphical elements. Yainvest can be used to incorporate nudging into money management interfaces and dashboards so that wealth managers or end clients can avoid their cognitive biases and achieve higher returns.

The Yainvest Profiler and Product Matchmaker have an embedded front-end (white-labeled iframe widget) and are also accessible via an open API. It can be deployed on-premises as a microservice, or be accessed via a SaaS service in the cloud. The Yainvest Financial Advice Engine can be custom-made to suit your data sets and unique operational environment. We are also creating a front-end featuring UI nudging for demonstration purposes.