NTUST IM6515701 AHP Case Study 2 Identifying key factors affecting consumers' choice of wealth...

NTUSTIM6515701

AHP Case Study 2

Identifying key factors affecting consumers' choice of wealth management services: An

AHP approach

NTUSTIM6515701 Outline

1.Introduction2.Literature review3.Data collection and

methodology4.Results5.Conclusion and

discussion

NTUSTIM6515701 Introduction

•Wealth management (WM) is a professional service which is the combination of financial / investment advice, accounting / tax services, and legal / estate planning for one fee.

•This study may lead to a better understanding on the following questions: Do the priority weights of the high-net-worth customers present a different pattern? What should the WM service providers focus on when they try to meet the needs of their target-clients?

NTUSTIM6515701 Introduction

•We surveyed the relative importance of factors, including the image, the products, and the quality of service, by directing a questionnaire to consumers who are using or planning to use WM services.

NTUSTIM6515701

1.Wealth management2.The Analytical Hierarchy

Process (AHP)

Literature review

NTUSTIM6515701 Data collection and methodology

•Using convenience sampling, there were 209 usable questionnaires. Researchers waited for the subjects to complete the questionnaires. Thus, the response rate (69.67 percent) is relatively high.

NTUSTIM6515701 Data collection and methodology

•The following table displays the sample distribution.

n %Sex Male 81 38.76

Female 128 61.24 Age 20 – 30 42 20.10

30 – 40 57 27.27 40 – 50 73 34.93 50 – 60 35 16.75 60 + 2 0.96

Education High Scholl or under 46 22.01 College / University 147 70.33 or above 16 7.66

Financial Background With Financial Background 103 49.28 Without Financial Background

106 50.72

Net Assets (NT$)1 < 89 42.58 (Assets － Debts) 1 – 77 36.84

+ 43 20.57Annual Income (NT$) < 150 71.77

+ 59 28.23

NTUSTIM6515701 Methodology

•We adopt AHP method for ranking the factors affecting consumers’ choice of WM services. The AHP method used in this study is a three-step process. 1. the decision problem is decomposed

into a hierarchy map of interrelated criteria.

2. the input data related to each criterion is generated by pair-wise comparisons of the criteria based on a nine-point weighting scale. The nine-point scale has been the standard rating system used for AHP.


3. the weight of each criterion in each level of the hierarchy is computed using the eigenvalue method

Figure 1. The hierarchical structure of the decision making problem

Selection of WM Service Providers

ProductsImage Quality of Service

Sub-Criteria

Sub-Criteria

Sub-Criteria

Sub-Criteria

Level 2

Level 3


Criteria and sub-criteria


•Considering that the investor attributes may influence the priorities of the criteria, the subjects’ investor attributes are classified by four dimensions: the risk bearing, the returns taking, the product-familiarity, and the investing habit, which are established by 13 questions using a 5-point Likert scale.


•Factor analysis is adopted as an exploratory tool to classify respondents into groups with similar investing characteristics and habits. Exploratory factor analysis is commonly used to uncover the underlying structure of a relatively large set of variables.

NTUSTIM6515701 Results─ Investment characteristics

•In the basic investment characteristics section of the questionnaire, the respondents were asked to rank their first three financial information sources.


•Panel A reveals that the two main sources for financial information are print media (47 respondents) and financial institutions (35 respondents), followed by the Internet, TV, and radio. Only 9 respondents rank relatives or friends as their main financial information resource. The respondents also rank the top three financial instruments in their assets allocation.


•Mutual funds (42 respondents) and stocks (40 respondents) appears most frequently among the respondents’ top three choice for asset allocation, followed by deposits (35 respondents) and insurance (34 respondents). Only few respondents allocate most of their assets to bonds, gold, foreign exchange, and trust.


•Panel C to E present the investment characteristics of the full sample, of the respondents with financial background, and respondents without financial background.


•The distribution of the proportion of expenditure is exhibited in Panel D. Living costs take up the largest proportion of the expenditure, followed by investment spending, education loans, and travel. The ranking of the proportion of expenditure is similar for respondents with and without financial background.

•Panel E shows the distribution of the investor attributes.

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Results─ Priority weights in the AHP decision trees

•In investigating the factors which could affect the consumers' choice of WM services, this study considered: image, products and quality of service.

•we find that “quality of service” is the most influencing factors in the selection of WM service provider. Among the four sub-criteria related to “quality of service”, “confidentiality” is the most important consideration, followed by attitude, convenience, and communication, in the order of their weights.

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•In addition to using the full sample to compute the weights of factors influencing the choice of WM services, subsamples characterized by several investor characteristics – gender, financial background, net assets, annual income, and investor attributes – which might affect the weights are also used to analyse the data in more detail.

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•he results indicate that the ranking of the criteria is not affected by gender or whether the respondents have financial background or not.

•Difference can only be found in a few sub-criteria under “quality of service” and “image”.

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•The last three columns show the priority weights by investor attributes – active, moderate, and conservative investors. As expected, active investors consider “products” as the most significant criterion and emphasize on “returns” of “products”. Moderate and conservative investors show similar preference: considering “quality of service” the most important factor.

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•The result shown in next page’s table indicates that special attention should be paid to “products” if high net worth customers are the target of the WM service provider. “Risk” factor is especially important to these customers. “Popularity” and “recommendation” seem to be the least important factors in their decision process.

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Panel A: Weight between the criteria / Weight within the criteria

CriteriaFull

SampleMale Female

With Financial

Background

Without Financial

Background

Net Assets

<

Net Assets

1

Net Asserts

+

Annual Income

<

Annual Income

+Active

Moderate

Conservative

Image 0.208 0.206 0.210 0.187 0.232 0.209 0.188 0.245 0.203 0.219 0.205 0.194 0.218

Recommendation

0.083 0.099 0.083 0.079 0.100 0.076 0.094 0.109 0.086 0.098 0.095 0.089 0.083

Professional 0.255 0.253 0.255 0.253 0.256 0.243 0.253 0.278 0.243 0.283 0.266 0.244 0.251

Morality 0.283 0.289 0.283 0.292 0.278 0.308 0.270 0.270 0.297 0.257 0.260 0.296 0.305

Reliability 0.266 0.240 0.266 0.265 0.246 0.258 0.260 0.242 0.250 0.266 0.260 0.247 0.254

Popularity 0.113 0.119 0.113 0.111 0.120 0.116 0.122 0.101 0.124 0.096 0.119 0.125 0.107

Products 0.386 0.394 0.381 0.390 0.380 0.337 0.439 0.391 0.361 0.449 0.425 0.369 0.357

Risk 0.333 0.360 0.316 0.356 0.309 0.341 0.313 0.361 0.318 0.372 0.292 0.353 0.362

Returns 0.296 0.278 0.308 0.309 0.281 0.280 0.318 0.281 0.284 0.322 0.351 0.280 0.255

Fees 0.157 0.154 0.159 0.137 0.180 0.168 0.151 0.148 0.164 0.138 0.158 0.173 0.148

Diversification 0.214 0.208 0.217 0.198 0.229 0.211 0.218 0.210 0.233 0.169 0.199 0.196 0.236

Quality of Service 0.406 0.400 0.409 0.423 0.388 0.454 0.373 0.365 0.436 0.332 0.370 0.436 0.425

Attitude 0.234 0.259 0.218 0.233 0.234 0.240 0.219 0.242 0.235 0.229 0.269 0.194 0.221

Communication 0.203 0.181 0.218 0.225 0.183 0.188 0.235 0.183 0.205 0.197 0.213 0.190 0.198

Confidentiality 0.331 0.314 0.341 0.329 0.330 0.337 0.325 0.326 0.331 0.331 0.293 0.317 0.374

Convenience 0.232 0.246 0.223 0.213 0.253 0.236 0.221 0.248 0.228 0.243 0.225 0.299 0.207

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Panel B: Ranking between the criteria / Ranking within the criteria

CriteriaFull

SampleMale

Female

With Financial

Background

Without Financial

Background

Net Assets

<

Net Assets

1

Net Asserts

+

Annual Income

<

Annual Income

+

Active

Moderate

Conservative

Image 3 3 3 3 3 3 3 3 3 3 3 3 3

Recommendation

5 5 5 5 5 5 5 4 5 4 5 5 5

Professional 3 2 3 3 2 3 3 1 3 1 1 3 3

Morality 1 1 1 1 1 1 1 2 1 3 2 1 1

Reliability 2 3 2 2 3 2 2 3 2 2 2 2 2

Popularity 4 4 4 4 4 4 4 5 4 5 4 4 4

Products 2 2 2 2 2 2 1 1 2 1 1 2 2

Risk 1 1 1 1 1 1 2 1 1 1 2 1 1

Returns 2 2 2 2 2 2 1 2 2 2 1 2 2

Fees 4 4 4 4 4 4 4 4 4 4 4 4 4

Diversification 3 3 3 3 3 3 3 3 3 3 3 3 3

Quality of Service 1 1 1 1 1 1 2 2 1 2 2 1 1

Attitude 2 2 3 2 4 2 4 3 2 3 2 3 2

Communication 4 4 3 3 3 1 2 4 4 4 4 4 4

Confidentiality 1 1 1 1 1 4 1 1 1 1 1 1 1

Convenience 3 3 2 4 2 3 3 2 3 2 3 2 3

NTUSTIM6515701 Conclusion and discussion

•This research makes an important first step toward understanding the consumers’ decision process and influencing factors in the selection of WM services.


•Care must be taken in interpreting or generalizing the findings. First, the convenient sample used in this study may not be representative of the entire population.

•Although special attention had been paid to consider the possible influence of various consumer attributes, a larger and more representative sample may be needed to confirm and generalize the results before they can be applied in practice.


•Second, other factors such as culture difference may limit the applicability of the results in other countries. Failure to consider cultural differences between countries has been the cause of many business failures.

•In this regard, further studies are necessary to determine the generalizability of the findings to other cultures.


•Future research may extend the current study by including more countries in the analysis. The results obtained with consumers in Taiwan might guide other similar research conducted in emerging markets, especially in China and neighbouring Asian countries.

NTUSTIM6515701

Thanks for your attention!

NTUST IM6515701 AHP Case Study 2 Identifying key factors affecting consumers' choice of wealth...

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