To Invest or Not to Invest?: The Roles of Product Information, Attitudes Towards Finance and Life Variables in Retail Investor Propensity to Engage with Financial Products
| Author | Carola Hillenbrand,Anastasiya Saraeva,Kevin Money,Chris Brooks |
| Published date | 01 October 2020 |
| DOI | http://doi.org/10.1111/1467-8551.12348 |
| Date | 01 October 2020 |
British Journal of Management, Vol. 31, 688–708 (2020)
DOI: 10.1111/1467-8551.12348
To Invest or Not to Invest?: The Roles of
Product Information, Attitudes Towards
Finance and Life Variables in Retail Investor
Propensity to Engage with Financial
Products
Carola Hillenbrand, Anastasiya Saraeva, Kevin Money and Chris Brooks1
The John Madejski Centre for Reputation, Henley Business School, University of Reading, Henley-on-Thames
RG9 3AU, UK, and 1The ICMA Centre, Henley Business School, University of Reading, Reading RG6 6BA,
UK
Corresponding author email: kevin.money@henley.ac.uk
Little is known in the current literature about the factors aecting retail investor (RI)
propensity to engage with financial products other than their attitude towards financial
risk (ATFR). This study explores the role of a number of variables, thematically grouped
into domain-specific (product information and attitudes towardsfinance) and general im-
pact factors (life variables). Data from 970 UK-based RIs, collected in 2017 across a
variant of products, suggest that when analysed thematically, variables related to product
information emerge as the most important group of influence factors. While the relevance
of ATFR is also vindicated in the findings of this study, the results bring a dose of life
context to situations of financial decision-making by illustrating that information about
the product as well as life variables matter significantly, in particular negative emotions
and sensation-seeking, thereby highlighting a duty of care towardspotentially vulnerable
people. The study discusses implications arising from the findings in relation to research,
practice and policy.
Introduction
Financial decision-making by retail investors1
(RIs) in the UK is said to have become more im-
portant recently. For example, pensioners in the
UK have options since 2014 to self-invest or spend
in entirety their pensions. Yet the financial en-
vironment has also become ever more complex,
with an increasing array of potential investments
to choose from (Bluethgen, Meyer and Hackethal,
Weare grateful to the ESRC for funding this research un-
der grant number ES/P000657/1.
1A retail investoris an individual who purchases securities
for his or her own personal account rather than for an
organization (Investinganswers.com, 2018).
2008; Bluethgen et al., 2008; Hunt, Stewart and
Zaliauskas, 2015). Financial advisors and institu-
tions in the UK typically invite RIs to fill in a
risk-profiling questionnaire when inquiring about
products. While this common practice is consid-
ered useful (Glenister,2014a, 2014b; Simon, 2016),
far less is known to date about the relevance of
other factors when RIs decide whether or not to
engage with financial products.2This is surprising
2We employ the term ‘engage with financial products’ as
a summary expression for a respondent’s interest in fol-
lowing up on the information contained in the leaflet that
they were shown. We use a slightly broad term to cover
all possible levels of interest, including a potential will-
ingness to invest in the portfolio, a desireto obtain more
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To Invest or Not to Invest? 689
given the significant role that choices concerning
financial products can exert on citizens’ lives, and
has led to calls by the UK Financial Conduct Au-
thority (FCA) to investigate the impact of other
factors on RI behaviour, such as product informa-
tion and life variables3(FCA, 2017).
Addressing such calls, this study aims to ad-
vance the current literature in two areas. First, it
builds on earlier scholarly work to specify and
empirically test domain-specific impact factors
relating to the investment context of RI decision-
making as well as more general life-related impact
factors (see e.g. Grable, Britt and Webb, 2008;
Weber, Blais and Betz, 2002). Second, it includes
cognitive and emotional aspects of these factors,as
research in other contexts has highlighted the im-
portance of both these elements for human
decision-making. However, studies combining
them in the context of behavioural finance are
scarce (Grable, 2017; Homann and Ketteler,
2015; Kahneman and Tversky, 2013; Lerner et al.,
2015; Lucey and Dowling, 2005; Weber, Blais and
Betz, 2002).
Indeed, behaviouralfinance has gained a rapidly
increasing prominence in recent years, following
the global financial crisis and related criticisms of
existing paradigms based on unrealistic assump-
tions of rational investors. Recent research has
highlighted the important role that emotions play
in financial decision-making and that frameworks
which explain behaviour must incorporate emo-
tional and motivational eects (e.g. Loewenstein
et al., 2001; Newell, Lagnado and Shanks, 2007;
Staddon, 2017).
We address this lacuna and explore the impact
of both cognitive and emotional variables in the
same study. We group variables thematically into
two types of domain-specific impact factors: prod-
uct information (including cognitive evaluations
and judgements of credibility, as well as positive
and negative emotions towards product informa-
tion) and attitudes towardsfinance/investment (in-
cluding positive and negative emotions towards
information before making a decision, an interest in
speaking to a financial adviser about the product, and so
on.
3Weemploy the term ‘life variables’ as a summary expres-
sion for general impact factors relatingto personality fac-
tors and/or life circumstances of RIs.This builds on previ-
ous literature byauthors such as Adams and Jiang (2017),
Grable and Joo (2004) and Grable et al. (2008), who use
varying terms to express person-related factors.
finance, attitudes towards financial risk and fi-
nancial satisfaction). We also include more gen-
eral life variables (including positive and negative
emotions towards life, self-esteem and sensation-
seeking), alongside a number of demographicvari-
ables such as income, net worth, home-ownership,
financial expertise and knowledge,gender and age.
Data from 970 UK-based RIs, collected in the
summer of 2017 across a variant of products,
suggest a vindication of attitude towards finan-
cial risk (ATFR) measures as important predic-
tors of RI intentions. Even when placed along-
side other financial variables, the ATFR measure
utilized emerges as the most important financially
based indicator.
Beyond ATFR, however, all four variables re-
lated to product information appear as significant
impact factors. When analysedthematically, prod-
uct information emerges as the most important
group of indicators above and beyond attitudes to-
wards finance/investment and life variables. While
the other variables investigated in this study, in-
cluding ATFR, may depend on unique personal-
ity characteristics and circumstances, product in-
formation contains a set of variables that can be
influenced by service providers and regulated by
industry bodies – and as such can provide an im-
portant tool for policy-makersand practitioners to
guide RIs responsibly.
Perhaps most interestingly, however, negative
emotions towards life and sensation-seeking are
also found to impact upon RI decision-making.
What is striking is that negative rather than pos-
itive emotions, as well as a predisposition for
sensation-seeking (i.e. a tendency to search for in-
tense sensations and a readiness to take exten-
sive risks – be they physical, legal or financial, in
the pursuit of such sensations) drive RIs to engage
more readily with financial products. This finding
highlights a duty of care among product providers
and financial advisors towardspotentially vulnera-
ble people in relation to financial products and the
communication thereof.
Overall, our findings support the usefulness
of dierentiating between variables relating to
domain-specific and general impact factors, col-
laborate the importance of including both cog-
nitive and emotional elements, and extend pre-
vious work by specifying and testing a number
of such variables empirically. Methodologically,
our approach outlines how predictor variables can
be treated independently or can be systematically
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