Simpler and standardised product information could greatly improve EU consumers’ investment decisions, behavioural study finds
EU consumers struggle to make optimal investment choices even for very simple investment tasks, says the Commission's first behavioural study on Consumer Decision-making in Retail Investment Services of 22 November 2010.
The study identifies the behavioural traits and external factors that most influence EU consumers’ investment decisions.
Some key findings:
- Consumers are often confused about the true nature of their investment. Nearly 40% of investors in stocks and shares (wrongly) believe their initial investment is protected;
Only 1 investor in 3 compares investments from more than one provider or considers more than one product from a single provider;
- People struggle to make optimal investment choices , even infor very simple tasks. Only 1.4% of subjects made all 5 five investment choices optimally in one specific experiment; ;
Simpler and standardised product information can significantly improve investment decisions.
- The effectiveness of disclosure of conflict of interest as a policy lever depends on the exact form and content of that disclosure.
The study is a follow-up to the findings of the 2009 Consumer Markets Scoreboard . It found the retail investment services market to be among the worst performing markets for consumers.
The Commission will present the study at the 2 nd Behavioural Economics Conference on 22 November 2010.
The study will complement the future Commission consultation on improving the regulation of packaged retail investment products ' (PRIPs). The PRIPs initiative will seek to better protect consumers by making investment products more transparent and easier to compare, and ensuring effective sales rules.
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