How Do Savers Think About and Respond to Risk? Evidence From a Population Survey and Lessons for the Investment Industry

Pensions Institute, 2014

40 Pages Posted: 19 Jun 2020

See all articles by David P. Blake

David P. Blake

City, University of London

Alistair Haig

Franklin Templeton

Date Written: 2014

Abstract

We find that savers do not tend to think about risk in an integrated way, especially when it comes to long-term risk. Instead they appear to think in segmented boxes. This is very bad for long term planning, since it can lead to inconsistencies. To illustrate, it is possible for people facing a savings shortfall to also be reluctant to either save more or take more investment risk to increase the expected return on their savings. It is important therefore that savers recognize that they might be subject to inconsistencies and behavioral barriers when implementing their savings plans which means they might fail to achieve their savings goals. We propose ways to help savers deal with these issues. These also provide useful lessons for the investment industry, including both financial advisers and product providers.

JEL Classification: D14, G22

Suggested Citation

Blake, David P. and Haig, Alistair, How Do Savers Think About and Respond to Risk? Evidence From a Population Survey and Lessons for the Investment Industry (2014). Pensions Institute, 2014, Available at SSRN: https://ssrn.com/abstract=3610681

David P. Blake (Contact Author)

City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZX
Great Britain
+44 (0) 20-7040-8600 (Phone)
+44 (0) 20-7040-8881 (Fax)

HOME PAGE: http://www.pensions-institute.org/

Alistair Haig

Franklin Templeton ( email )

Edinburgh, Other (Non US)
United Kingdom
EH10 5TE (Fax)

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