Managerial implications

There is no doubt that more active capital markets would benefit the whole society. The amount of privately-owned financial capital keeps rising and further expands consumer investment opportunities beyond bank deposits.

Even though the interest of Finnish households in investing has improved (Pellinen 2011), there is still no denying that over 80 billion euros lie on

deposit accounts (Official Statistics of Finland 2014) and that only 15% of Finns own stocks (Ministry of Finance 2012). In view of that, the amount of potential investors is enormous. Consequently, an improved understanding of the factors affecting consumer investment and savings decisions will assist not only financial companies in developing more precise marketing and selling strategies but also public actors in their decision making.

Based on the results of this research, the aging population with increased wealth is not going to make a drastic change in the Finnish financial markets itself. This is because perceived behavioral control only has a minor effect on one’s investment intentions, meaning that even if one perceives he or she would have the money to invest in stocks or funds, it only increases his or her investment intentions to a small extent.

However, the results suggest that the assessment of the benefits and sacrifices of investment products is strongly affected by one’s self-assessed investment knowledge. Moreover, self-self-assessed knowledge affects consumer’s intentions to invest indirectly. Thus, subjective knowledge increases consumers’ expectations regarding stock and fund investments value and decreases the expectation of investment related sacrifice. Consequently, by educating consumers, both public actors and financial companies are able to positively influence consumers investment related anticipations and thereby increase their investing activities. Yet, it needs to be acknowledged that providing financial education is much more than simply providing information. An excessive amount of complex information might in fact make consumers even more unwilling to learn about financial matters (Diacon & Ennew 2001). Educating, then again, should consist of a combination of informing, skill-building, and motivating, which together enable the changes in one’s behavior. (Hilgert et al. 2003).

Thus, taking into account that self-assessed knowledge reflects one’s objective knowledge and self-confidence, wealth managers and

investment advisors should provide the customer with investment information that is as easy to understand as well as to encourage them to believe that they know enough to make informed decisions. After all, consumers are more likely to purchase products when the products are perceived less complex and easier to understand (e.g. Davis et al. 1989;

Moore & Benbasat 1991; Rogers 1995; Venkatesh 1999), and the results of this study suggest that the same applies to investment products.

Furthermore, the results suggest that consumers have higher intentions to invest when they expect the investment alternative to deliver economic, functional and emotional value for them. Expected economic value is increased when the consumer believes that the management fees of the investment are low. Functionality, then again, refers to the convenience of investing, and thus consumers who are less interested in investment related matters and want to devote less time for investment related activities might look for complete solutions – even if their monetary cost would be higher than other investment alternatives. Emotional value refers to the consumer’s anticipation regarding the excitement and enjoyment of investing. Accordingly, when consumers expect investing to be exciting and fun, their intentions to invest are higher. Consequently, by understanding the different dimensions of expected investment value, financial companies are able to create more effective marketing and selling strategies by focusing on value delivery. As suggested by Puustinen (2012), financial companies can create competitive advantages by focusing on prize, solutions, experiences or meaning. However, based on the results of this thesis, if the target market of the company consists of average household consumers, focusing on meaning (i.e. symbolic value) would be pointless.

Moreover, not only the managers in financial conglomerates but also public actors should understand that consumers are not only motivated by financial gains when making investment and saving decisions. Thus, simply changing the dividend taxation, as suggested by the Ministry of

Finance (2012), most likely would not cause the desired change in the amount of stock investors. After all, most Finns are not even familiar with the current taxation.

The results also revealed that consumers not only avoid investing because of the financial risk, but also because of the required effort, fear of psychological burden and the risk of becoming cheated by unethical actors. Financial companies can reduce consumers’ expectations of required effort by creating simple and easy investment services which necessitate a minimal amount of information searching and learning. And as previously stated, even though the basic assumption in economic theory is that consumers are better off with more options, too many alternatives cause an information overload (Tapia & Yermo 2007). To reduce the cognitive burden, the amount of investment options should be rather limited, and served with simple information without excessive financial jargon. Moreover, to reduce the consumers’ fears, anxiety and nervousness, wealth managers and investment advisors should have excellent social and emotional skills (empathy) to be able to support customers emotionally in the pre-investment stage. Finally, it is important that financial services and products are presented as transparent as possible because the distrust in products and their providers is also a major concern of the consumers and thereby decrease their investment intentions. Thus, on the basis of the results, the reputation of companies and financial advisors is a critical factor in consumer financial decision making.

Finally, as perceived compatibility has the greatest effect on investment intentions, consumers should be provided with investment services and products which require the least amount of change in their behavior and which are easily assimilated into one’s life. Thus, the results suggest that consumers currently keep their assets on a bank account – not because accounts are the least risky option, but because they consider it to be most compatible with their past behavior and current needs, and also to

require the least amount of change in behavior. Yet, as previously mentioned perceived compatibility is affected by expected investment value and expected sacrifice, which then again are affected by the consumer’s assessment of his or her investment knowledge.

Acknowledging these relationships, managers and public actors are better able to affect consumer saving and investment decisions and promote investing in stocks and funds.

Overall, the results provide several implications for managers and public decision makers about the complex interrelations of subjective knowledge, expected sacrifice, expected investment value, compatibility, perceived behavioral control and consumers’ investment intentions. Understanding which factors affect consumer stock and fund investment intentions positively and which negatively will assist in the attempts to affect consumer wealth allocation decisions. Moreover, the thesis provided insights into how consumers with different experience levels evaluate investing, and how consumer preference might be affected by previous behavior. Consequently, the results can assist managers as well as public authorities as they are creating strategies and schemes to promote household investing.