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Heuristics in financial decision-making: the selection of SME financing by advisers in an increasingly diverse market

Kirsten Rauwerda (CAREM, Faculteit Business en Economie, Hogeschool van Amsterdam, Amsterdam, The Netherlands) (Vrije Universiteit Amsterdam, Amsterdam, The Netherlands)
Frank Jan De Graaf (CAREM, Hogeschool van Amsterdam, Amsterdam, The Netherlands) (Amsterdam Business School, Amsterdam, The Netherlands)

Management Decision

ISSN: 0025-1747

Article publication date: 16 June 2021

Issue publication date: 17 August 2021




In order to better understand how heuristics are used in practice, the authors explore what type of heuristics is used in the managerial domain of financial advisors to small and medium-sized enterprises (SMEs) and what influences the shaping of these heuristics. In doing so, the authors detect possible fast-and-frugal heuristics in day-to-day decision-making of independent financial advisers who help owners of SMEs to acquire capital (e.g. loans, factoring, leasing and equity).


The authors inductively assessed the work of financial advisers of SMEs. Based on group discussions, the authors drew up a semi-structured interview-protocol with descriptive questions about how financial advisers come to a deal for their clients. The interviews of 19 professionals were analysed by relating them to the theory of fast-and-frugal heuristics.


Within their decision-making, advisers estimate the likelihood of acceptance by a few financial providers they know well in their personal network with a strong bias towards traditional banking products, although there are a large number of alternatives on the Dutch market. “Less is more” seems to be a relevant principle when defined as satisficing. Heuristics help advisers to deal with behavioural and economic limitations. Also, the authors have found that client interaction, previous working experience and the company the adviser is working for influences the shaping of the simple rules the adviser is using.

Research limitations/implications

The study shows how difficult it is to understand the ecological rationality of a certain group of professionals and to understand the “less is more” principle. Financial advisers to SMEs use cognitive shortcuts and simple rules to advise SME-owners, based on previous experiences, but it is difficult to determine whether that leads to the same or even better solutions for them and their clients than using probability theory and financial optimisation models. Within heuristics, satisficing seems to be a dominant mechanism. Here, heuristics help advisers in recognising possibilities by searching for similarities between a current financing case and previous experiences. The data suggests that if “less is more” is defined as satisficing for one or more stakeholders involved, the principle dominates the decision making of financial advisers of SME's.

Practical implications

The authors suggest the relevance of a behavioural approach to finance by assessing the day-to-day decisions of financial advisers of SMEs. Also, the authors suggest that financial advisers are guided by previous experiences, and they do not fully assess a wide range of options in their work but need shortcuts to fulfil the needs of their clients.


The study comes close to day-to-day decision-making in finance by assessing how professionals make decisions. The authors try to understand types of heuristics in relation with “ecological rationality” and the less is more principle. The authors assess financial advisers of SME-companies, a group that has gotten little research attention until now. The influence of client interaction and of the company the adviser is working for is remarkable in the shaping of the advisers' simple rules.



The authors would like to acknowledge the editors and the anonymous reviewers for their constructive feedback and his colleagues Jamal Abid and Lex van Teeffelen for their work within this research project. The research is (partly) funded by the Dutch Research Council/SIA Raak, project “Naar MKB-advies over gestapeld financieren”.


Rauwerda, K. and De Graaf, F.J. (2021), "Heuristics in financial decision-making: the selection of SME financing by advisers in an increasingly diverse market", Management Decision, Vol. 59 No. 7, pp. 1728-1749.



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