Investment triggers and trust

A comparative study on perceptions of consumers and financial experts

Presentation at IAREP 2008 at LUISS Rome

Anne Sunikka, HSELiisa Peura-Kapanen, NCRC

5 of September, 2008

National Consumer Research Centre

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20082

Overview of the presentation

1. Interview / Focus Group Themes and Research Questions

1. Methodology2. Pertinent Concepts3. Model of Investment Behavior 4. Discussion and Conclusion

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20083

Interview / Focus Group Themes and Research Questions

• Interview / Focus Group Themes– consumers’ perception of wealth– reasons for accumulating wealth and – perceived risks related to wealth management

• Research Questions– What are the most common triggers for

investment behavior?– What elements influence investment behavior?– In addition, comparison of the opinions and

perceptions of two groups of informants

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20084

Background information of the informants

Focus groups

Expert interviews

Number of participants

33 11

Number of female

17 3

Avg. age of participants

50 (range 27 - 78)

41 (range 30 - 46)

Avg. yrs of financial work experience

- 17

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20085

Pertinent Concepts

• Involvement: ”The extent of interest and concern that a consumer brings to bear on a purchase decision task” (Mittal 1989).

– Assumption: savings and investment products are highly and enduringly involving.

• Information Search: ”The motivated activation of knowledge stored in memory or acquistion of information from the environment” (Engel et al. 1991).

– Assumption: consumers are rational decision makers and capable of understanding the information they acquire.

• Trust: ”Individual's willingness to accept vulnerability on the grounds of positive expectations about the intentions or behaviour of another in a situation characterized by interdependence and risk” (Ennew and Sekhon 2007).

– Assumption: trust is essential for a relationship that is characterized by a high degree of uncertainty.

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20086

Investment Triggers

• Similar triggers mentioned • Importance of triggers differed

– Previous personal experience– Friends, world-of-mouth– Family – not mentioned by low involvement

consumers– Media – influential especially in portraying negative

news– Internet – mentioned and found useful by high

involvement consumers, distrusted by financial experts

– Financial institutions and advisors – perceived as the most influential by financial experts and low involvement consumers.

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20087

Involvement

Trust

2. Civil duty saverLow involvementHigh trust

1. Disinterested by-standerLow involvementLow trust

4. Convenience-driven investorHigh involvementHigh trust

3. Cost-aware investorHigh involvementLow trust

Investment triggers

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20088

Involvement

Trust

- Financial advisors, WOM- Recommendations- Convenience- Simple istruments

- No funds- Human capital- Ethical values- No action

- Several information sources- Own FA appreciated- Partial distrust- Convenience - Complex instruments

- Internet, several information sources- Independent decision-making- Fees, ROI- Complex instruments

Investment triggers

Anne Sunikka and Liisa Peura-Kapanen IAREP 5 Sept. 20089

Discussion and Conclusion

• Theoretical implications– Involvement: Investing is not necessarily highly and

enduringly involving activity– Information search: Emotions play an important role

in decision making & consumers do not understand all the information they access

– Trust: Service providers and consumers emphasize different facets of trust, trust in engineering issues is not an issue

• Mangerial implications– Importance of ”knowing your customer” – Marketing should be adapted to different groups– Elucidation of investment data is important– Trasparency of information increases trustworthiness– Internal human resource policies