Nedgroup Investments has released the findings from its Nedgroup Investments Financial Personality Survey.
The survey, which assessed over 3 000 South African investors and advisors, is one of the largest surveys of its kind ever conducted in Africa. Amy Jansen, Head of Behavioural Solutions at Nedgroup Investments led the survey in partnership with oxford Risk, specialist behavioural economists.
“We believe that in order for people to understand their investment journey they have to be comfortable enough on a personal level to firstly, invest in a certain portfolio and secondly, stay invested in it for the appropriate timeframe. If there is one thing this study showed us very quickly, it’s that there is no one-approach that will achieve this. It’s time for the investment industry to do things differently,” she says.
One of the key findings in the South African study, which assessed individuals against 12 defined personality traits that have been known to affect behaviour – was that there are multiple dimensions to risk attributes when it comes to investing for South African investors. There are also six identifiable personality archetypes that people tend to cluster around.
Importantly, the six personality groups could be separated into two broader groups according to their level of composure – measured as someone’s tendency to be emotionally engaged with the short-term. “This is significant because it means we can identify people who are more likely to be emotionally distracted by what is happening around them, and we can make sure that we provide the necessary support for them instead of simply suggesting an investment portfolio. These groups will need varying levels of emotional support to feel comfortable,” says Jansen.
On the other side of the continuum are the personality groups that have higher composure and are less affected by noise. “Creating a comfortable environment for these types of investors means enabling them to make their own decisions in their own time. For example, investors who have the highest composure might only feel comfortable with a decision if they feel that they have done it all themselves. They do not want any kind of intervention or assistance, and trying to provide it might even alienate them,” explains Jansen.
This has real, practical implications when it comes to the way that financial companies interact with their investors.
For example, Jansen says, advisers can focus on adapting to the underlying personality of the investor and anticipate how they are likely to react and accommodate that rather than trying to change how they are feeling.