Consumers need guidance on investment
Behavioural finance research has found education is not sufficient in persuading investors to make the right decisions.
Axa Asia Pacific strategy head Arun Abey said people needed to be guided in order to make the right investment decisions.
“After 25 years of research there is no evidence … that getting people to save and invest better is simply a matter of getting them the right education,” he said.
“While education is important and necessary, it is not sufficient. Behaviours in finance are quite deep and subtle and usually counter intuitive.”
Abey said the ambition for AXA over the next five years is to be the leader in understanding consumer behaviour in respect to finance and then to re-engineer its business accordingly.
University of California Professor Shlomo Benartzi said most people did not understand basic financial concepts such as compounding, management fee’s and the notion of diversification.
“Most people will say they want to save more, but never follow up on that. There is a disconnection between the intention and the action,” Benartzi said.
Benartzi said lessons learned from behavioural finance could be powerful if integrated to create new products, services and ways of communicating and educating investors.
AUTHOR
Mike Taylor
Recommended for you
ASIC has permanently banned a former Perth adviser after he made “materially misleading” statements to induce investors.
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
