Distribution Technology, the leading provider of comprehensive web based financial and investment planning tools, in conjunction with the Pensions Institute has completed the first major independent, quantitative survey of UK consumer attitudes to risk. The survey work was carried out by NOP.
The survey called “Benchmarking UK consumer attitudes to risk” was carried out in order to provide a national scale against which individual consumer responses can be calibrated. The benchmark will allow advice firms to quantify the level of risk with which an individual feels comfortable and therefore provide an effective and robust basis for the creation of an investment strategy.
NOP completed face-to-face interviews with 966 adults over 18 and under 75, representative of the UK population by factors including gender, age, region and wealth. The questions built on research by academics from around the world looking at ‘loss aversion’.
Kingsley Washoma, Head of Analysis at Distribution Technology said, “Most approaches to risk profiling rely on the idea of a ‘rational investor’. They assume that individuals are willing and able to make trade offs around the risk and return options they face. This is not the case however as consumers are often far more focused on avoiding losses than making gains, they also may not have the background and understanding required in order to deal with these sort of questions. Our research confirms this and indeed suggests that we may in fact be more risk averse than other countries, notably the US. As a result any research imported from abroad should certainly be adjusted to reflect the characteristics of the UK population”.
Ben Goss, Managing Director of Distribution Technology said, “This is the first survey of its kind in the UK and will provide our clients with a unique risk profiling benchmark grounded in the latest academic thinking and which is actually supported by quantitative UK research. It comes at a time when the issue of risk profiling is more important than ever and as a result will be of enormous value to our clients as they seek to implement robust and compliant risk profiling.”
David Blake, Director of the Pensions Institute said, “Much existing analysis is flawed because it is usually based on a scale calibrated as a result of discussions with a few individuals or focus groups. It is not statistically sound and does not measure the individual against the population”.
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