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Dissecting the investor psyche: what motivates our clients

Prepared For: definition , IFSA Conference 2005 By: Linda McAvenna. Dissecting the investor psyche: what motivates our clients. Agenda. Setting the scene An Australia-wide Snapshot in 2005 Managed Investments in 2005 2005 vs 2004 – trends in the marketplace Dissecting the investor psyche

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Dissecting the investor psyche: what motivates our clients

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  1. Prepared For: definition, IFSA Conference 2005 By: Linda McAvenna Dissecting the investor psyche: what motivates our clients

  2. Agenda • Setting the scene • An Australia-wide Snapshot in 2005 • Managed Investments in 2005 • 2005 vs 2004 – trends in the marketplace • Dissecting the investor psyche • Financial Advice in 2005 • What have we learned

  3. Setting the Scene

  4. Purpose of the research • This research is aimed at assisting IFSA members in identifying what motivates managed investment (managed fund and superannuation) customers • With a view to: • encouraging higher participation in managed investments [funds and superannuation] • improving investor sentiment • building a more confident investor base • educating and engaging the target market

  5. An Australia-wideSnapshot in 2005[General Population Survey]

  6. An Australia-wide Snapshot in 2005 General Population telephone survey n=802 A representative sample across Australia To determine incidence of managed fund and superannuation investors, and Usage of financial advisers across the Australian community nationally Fieldwork conducted in July 2005

  7. Current investments Base: General Population n=802 • Higher among: • Empty Nesters 32% • H’hold income $130k + 36% • Use Fin Adviser 37% Q1. Do you currently have any of the following investments either in your own name, in joint names or as part of an investment club?

  8. Currently use a financial adviser Base: General Population n=802 Based on a representative sample of Australian adults Q7. Do you currently use the services of a financial adviser or planner?

  9. Likelihood of using a financial adviser over the next 12 months Based on Australian adults who do not currently use a financial adviser Base: Do not currently of a financial adviser n=602 Mean Score /4 2.0 Q16A/26. In the next 12 months, would you say that you are…

  10. Financial advice in 2006? Base:General Population n=802 Q7. Do you currently use the services of a financial adviser or planner? Q16a. In the next 12 months, would you say that you are…

  11. Managed Investmentsin 2005[Investor Sample]

  12. Investor sample composition • n=592 with managed investments… • n=354 with $25k plus in managed funds • n=238 with $25k plus superannuation (but no managed funds) Total n=592 investors with managed funds and/or superannuation Fieldwork conducted in July 2005

  13. Main issues currently influencing investment decisions Base: All investors n=592 Q1. From your perspective, what are the top three issues currently facing the investment markets that are affecting your investment decisions?

  14. Current investments Base: All investors 2005 n=592 Q1. Do you currently have any of the following investments either in your own name, in joint names or as part of an investment club?

  15. Perceived performance of investment options over past 12 months Base: All investors 2005 n=592 Q2. Overall, how well would you say each of the following investment options has been performing over the last year? Please use a scale of 0 to 10 where 0 represents extremely poorly and 10 represents extremely well.

  16. Perceived performance of investment options by whether currently use financial adviser Base: All investors 2005 n=592 Q2. Overall, how well would you say each of the following investment options has been performing over the last year? Please use a scale of 0 to 10 where 0 represents extremely poorly and 10 represents extremely well.

  17. Managed InvestmentsKey Choice FactorsImportance vs. Performancein 2005

  18. Managed Investments in 2005Key Choice Factors* • I trust my money is safe • Delivers on promise • Long term returns on investment (more than 5 years) • Fees and charges • Reputation of investment operator / fund manager • Transparency in all aspects of operations • Risk associated with the investment • Experts make the decisions • Tax effectiveness • Ease of accessing your money • Ease of moving money / funds between products • No stress • Advice / recommendation from financial adviser / planner • Ethically / socially responsible • Range of product options available • Short –term return on investment (2-5 years) • Awards or star ratings • Level of minimum investment * Derived from qualitative investor research conducted in 2004 on behalf of IFSA

  19. Q9How important are each of the following factors to you when considering whether or not to invest in managed investments (managed funds / unit trusts and superannuation funds). Please rate each of the factors on a scale from 0 to 10 Q10 How satisfied are you with the performance of your managed investments (managed funds / unit trusts and superannuation funds) in relation to each factor listed below. Again, please rate each factor on a scale from 0 to10

  20. Key Choice FactorsImportance vs. Performance in 2005 • I trust my money is safe • Delivers on promise • Long term returns on investment (more than 5 years) • Fees and charges • Reputation of investment operator / fund manager • Transparency in all aspects of operations • Risk associated with the investment • Experts make the decisions • Tax effectiveness • Ease of accessing your money • Ease of moving money / funds between products • No stress • Advice / recommendation from financial adviser / planner • Ethically / socially responsible • Range of product options available • Short –term return on investment (2-5 years) • Awards or star ratings • Level of minimum interest Importance Average 6.3 Performance

  21. Perceived performance of managed investments by whether currently use financial adviser * 10+ yrs - 2004

  22. 2005 vs 2004Trends in the Marketplace

  23. Perceived performance of investment options over past 12 months Base: All investors 2005 n=592 2004 n=600 * 2005 only Q2. Overall, how well would you say each of the following investment options has been performing over the last year? Please use a scale of 0 to 10 where 0 represents extremely poorly and 10 represents extremely well.

  24. Importance of Key Choice Factors2005 vs. 2004 * 10+ yrs - 2004

  25. Performance of Key Choice Factors2005 vs. 2004 * 10+ yrs - 2004

  26. 2005 2004 Key Trends 2005 vs. 2004Importance vs. Performance • I trust my money is safe • Delivers on promise • Long term returns on investment (more than 5 years) • Fees and charges • Reputation of investment operator / fund manager • Transparency in all aspects of operations • Risk associated with the investment • Experts make the decisions • Tax effectiveness • Ease of accessing your money • Ease of moving money / funds between products • No stress • Advice / recommendation from financial adviser / planner • Ethically / socially responsible • Range of product options available • Short –term return on investment (2-5 years) • Awards or star ratings • Level of minimum interest Importance Average 6.3 Performance

  27. Dissecting the Investor Psyche[Investor Segmentation]

  28. Dissecting the investor psyche - Investor Segmentation Confident - DIY It’s All Too Hard Cruising – Not Engaged Confident – Needs Support Stressed – Needs Support

  29. Confident DIY 19% • Predominantly male • Wide investment portfolio including direct shares, managed funds, superannuation and investment property • Most likely to have direct shares and investment property • 3 in 5 have $100K+ invested in superannuation • Optimistic about their financial future • Clear financial goals • Actively plan their finances • Knowledgeable about financial matters in general • Less likely to use a financial adviser (than some other investor segments)

  30. Confident – Needs Support 23% • Most likely to have managed funds • 3 in 4 have $100K + invested in superannuation • Have clear financial goals • Optimistic about their financial future • Inclined to be over 50 years • Actively plan their finances • By far the most likely investor segment to use a financial adviser

  31. Stressed - Needs Support 20% • Similar to ‘Confident – Needs Support’ investors in that they: • Do try to actively plan their finances • and do have clear financial goals • 1 in 2 have $100K + invested in superannuation • But are… • less optimistic financially • more stressed about financial matters • A higher incidence of under 40 year olds • More noticeable amongst females • More likely to use a financial adviser (than some other investor segments)

  32. Cruising – Not Engaged 21% • Most have direct shares • 2 in 3 have $100K + invested in superannuation • Not particularly optimistic about their financial future but… • not stressed about it either • Don’t consider themselves experts in financial matters but… • would not pay anyone to manage their financial affairs. • More likely to be over 50 years • As with the ‘Confident – DIY’ • Predominantly male • Less likely to use a financial adviser

  33. It’s All Too Hard 17% • Least likely to have managed funds • 1 in 3 have $100K + invested in superannuation • Believe financial planning takes up too much time – prefer to spend their time on something else • Don’t enjoy making financial decisions • Claim to be lazy when it comes to managing their finances • Agree they don’t pay enough attention to their finances • Females most likely to be in this segment • A younger (under 40) skew

  34. Financial Advicein 2005[Investor Sample]

  35. Currently use a financial adviser Base:Investors n=592 Based on Managed Investment customers Q13. Do you currently use the services of a financial adviser or planner?

  36. Use of a financial adviser – by investor segment Base:Investors n=592 Q13. Do you currently use the services of a financial adviser or planner?

  37. Frequency of contact with financial adviser Base: Currently use a financial advisern=336 Q17. How frequently does your financial adviser/planner initiate face-to-face contact with you? Would it be … Q18. And how often does your financial adviser/planner initiate other types of contact with you, for example, by telephone, fax, email or letter? Would it be…

  38. Satisfaction with financial adviser Base: Currently use a financial adviser n=336 Mean Score /4 3.3 3.4 3.4 3.3 2.9 Q21a. How satisfied would you say you’ve been with your personal experience with financial advisers/planners?

  39. Reliance on financial adviser Base: Currently use a financial adviser n=336 Mean Score /6 4.4 4.5 4.5 4.3 4.2 Q22. Which one of the following statements BEST applies to you?

  40. Value of current adviser Q25. I would now like you to consider the value you place on your financial adviser or planner.I am going to read out some more statements. Using the same 0 to 10 scale, where 10 means you ‘strongly agree’ and 0 means you ‘strongly disagree’, please tell me whether you agree or disagree with each statement as they relate to you. You may give any score between 0 and 10.

  41. Value of currentFinancial Adviser / Planner As a result of using a financial planner or adviser I … Base: Currently use a financial adviser n=336

  42. Value of currentFinancial Adviser / Planner cont. Base: Currently use a financial adviser n=336 As a result of using a financial planner or adviser I …

  43. Likelihood of using a financial adviser over the next 12 months Investors who do not currently use a financial adviser Base: Do not currently use a financial adviser Investors n=256 Mean Score /4 1.95 Q26. In the next 12 months, would you say that you are…

  44. Financial Advice in 2006? Base:Investors n=592 Q13. Do you currently use the services of a financial adviser or planner? Q26. In the next 12 months, would you say that you are…

  45. What have we learned

  46. Investor sentiment 2005 vs. 2004 • Over the past 12 months managed funds are perceived to have performed slightly better than superannuation or investment property, though not as well as direct shares • Compared with 2004, satisfaction with managed investments (funds and superannuation) has shown a marked increase, (as has satisfaction with direct shares), though not surprisingly, satisfaction with property investment has slumped • In 2005, managed investment customers appear to be … • ‘less stressed’ than they were 12 months ago • less concerned about fees and charges • less concerned about the short-term (2-5 years) return on managed investments • less concerned about awards or star ratings • less concerned about the levels of minimum investments • However, the biggest ‘gap’ in terms of importance vs. performance relates to ‘fees and charges’ which suggests that investors feel that more improvements can be made in this area

  47. The value of financial advice • Nearly 1 in 4 Australian adults currently uses a financial adviser or planner, and this is set to rise in 2006 • Amongst adults with managed investments, the figure is significantly higher at close to 6 in 10 – this figure is also likely to increase in 2006 • Satisfaction with financial advisers/planners is highest amongst investors who have a face-to-face meeting with their adviser/planner at least every six months • Investors who currently use a financial adviser/planner are more satisfied with the performance of managed funds and superannuation over the past year (than investors who do not currently use one) And most importantly… • Satisfaction with managed investments, across all 18 identified managed investment key choice drivers, is noticeably higher amongst investors who currently use a financial adviser/planner

  48. Thank you

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