Hidden wealth

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Hidden wealth how consumers perceive wealth and
its management?Anne SunikkaHelsinki School of
Economics Presentation at IAREP 2008 at LUISS
Rome

• Tomi Dahlberg, Anne Sunikka and Anssi Öörni
• Helsinki School of Economics, Department of
  Business Technology
• 4 of September, 2008

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Research-in progress project

• A new concept for total wealth management?
• Consumers would get a new service for wealth
  management, diversification and allocation
• Financial companies would get a systematic new
  tool that would facilitate customer encounters
• Main research partners
• National Consumer Research Centre
• Helsinki School of Economics
• Financiers
• Finnish funding agency for technology and
  innovation
• A Finnish financial conglomerate
• A Finnish financial newspaper
• Others
• Federation of Finnish Financial Services
• Insurance Supervisory Authority
• Tampere University
• New York University

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Overview of the presentation

• Research questions
• Multiple methods
• Some theories
• Preliminary results
• Conclusion

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Interview / Focus Group Themes and Research
Questions

• Interview / Focus Group Themes
• consumers perception of wealth
• reasons for accumulating wealth and
• perceived risks related to wealth management
• Research Questions
• How do consumers perceive wealth in general and
  different asset classes, in particular?
• How well do empirically discovered motives relate
  to those proposed by financial and social
  psychological theories?

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Background information
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Background information
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Theories (1)

• Financial theory
• Efficient market hypothesis (Roberts, 1967 Fama,
  1965 1970)
• Capital asset pricing model (CAPM) that builds on
  the idea of an efficient frontier (Markowitz,
  1952 Sharpe, 1965)
• Assumptions about rational, value maximizing
  consumers (homo economicus) and the availability
  of perfect market information.
• Behavioral finance
• Bounded rationality (Simon, 1955)
• Judgment diverges from rationality
  overconfidence, optimism, anchoring,
  extrapolation, and heuristics (see e.g. Kahneman
  et al., 1982).
• Choice diverges from rationality prospect theory
  (Kahneman and Tversky, 1979).

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Theories (2)

• Consumer behavior and social psychological
  theories
• Mowen (1988) three perspectives for consumer
  purchase decision-making
• Decision-making perspective buying behavior
  results form consumers engaging in a
  problem-solving tasks (Simon, 1957 Howard and
  Sheth, 1969 Engel et al., 1968)
• Experiential perspective consumers make
  purchases to create feelings, experiences and
  emotions (Pillar and Mueller, 2004 Thompson,
  1989)
• Behavioral influence perspective consumers act
  in response to environmental pressures (Foxall,
  1991 1993).
• TRA (Fishbein and Ajzen, 1975) and TPB (Ajzen,
  1991) propose the most important determinant of a
  person's behavior is behavioral intent. The
  individual's intention to perform a behavior is a
  combination of attitude toward performing the
  behavior and subjective norm (and perceived
  behavioral control in the case of TPB).

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Conclusions

• Consumers do not perceive wealth as a unified
  concept or portfolio. Rather, various wealth
  categories are perceived differently.
• The motives to manage wealth given by consumers
  deviate from those proposed by financial
  theories.
• The link between risk and return is poorly
  represented among consumers wealth management
  motives.