The Standard Chartered Investor Personality Study 2020 - Understanding personality traits enables better investment decisions
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The Standard Chartered Investor Personality Study 2020 Understanding personality traits enables better investment decisions In partnership with behavioural finance experts
Contents
03
Introduction
04
Foreword
05 Executive summary
06 Personalities differ by market
06 Putting behavioural insights to work
06 Brief Methodology
07
Financial personalities:
the nine defining traits
09
Investor behaviour in markets
09 Where are the Enthusiastic Investors?
09 Where are the Conservative clustered?
09 Where are the Comfortable residing?
What do personality traits tell us?
11
12
The value of hyper-personalisation
13
Can technology hyper-personalise
advisory at scale?
2 The Standard Chartered Investor Personality Study 2020
Introduction
Personality matters
At Standard Chartered, our Investment Philosophy is very Study 2020 adds depth to our approach, providing insights
much guided by the recognition that cognitive biases influ- to how investors may react in certain market conditions.
ence decision making. With this in mind, we work together
The launch of this study is timely given the extreme market
with our clients to better understand and mitigate biases,
turbulence we are experiencing. I hope that the insights you
and make decisions that can achieve better investment
glean from this study will bring greater clarity and help you
outcomes.
navigate the current market uncertainty.
The success of this approach comes from understanding in-
vestor behaviour at a deeper level. The Investor Personality
Didier von Daeniken
Global Head,
Private Banking and Wealth Management
The
The Standard
Standard Chartered
Chartered Investor
Investor Personality
Personality Study
Study 2020
2020 33
Foreword
In times of market turbulence, such as the current impact of the COVID-19, smart investment
is key to building wealth. But the complexity and current volatility of financial markets and
interconnectedness of the global economy makes it increasingly difficult for investors to
achieve the returns to which they aspire. In fact, Standard Chartered’s recent research
into the wealth aspirations of people in Asia, Africa and the Middle East revealed that
56 per cent are set to fall short of their goals by half or more, based on their current savings
and investments.
To invest successfully, we need to make better financial three main investor archetypes: Conservative, Comforta-
decisions, using objective advice and insights, which can ble and Enthusiastic. Each of these gives us specific clues
be challenging given the proliferation of information and in- about how investors would feel about a certain portfolio,
vestment solutions available. And when it comes to using how they make decisions and how they could potentially
information to make sound investment decisions, we also improve their investments.
need to address the natural or cognitive biases that can
These insights can help investors and advisors achieve bet-
cloud our judgement and make us less objective.
ter investment outcomes, by recognising patterns in their
During times of market stress, as evidenced most recently decision-making and understanding their own limitations
in the wake of the COVID-19 pandemic, investing can feel effectively translating behavioural finance into practical ad-
emotionally uncomfortable, compromising our ability to vantages. In this way, they can optimise their approach to
make objective decisions. It is difficult to completely switch investing and diversify their portfolios to levels that they are
off what makes us human, yet getting it wrong can be cost- comfortable with.
ly. People who are not currently in the markets could be
At Standard Chartered Wealth Management we have been
reluctant to invest, foregoing returns. Meanwhile active in-
building our expertise in behavioural finance and incorpo-
vestors could be too quick to trade, leading them to sell low
rating it into our investment philosophy. Looking ahead, we
and buy high.
plan to combine financial personality data with emerging
So how can investors and wealth advisors overcome these technologies such as artificial intelligence to build innova-
challenges? A key part of Standard Chartered’s approach tive tools to provide clients with much more personalised
to investment is recognising and understanding the various investment advice, much faster, to help them navigate the
natural or cognitive biases that can influence the decisions inevitable ups and downs of financial markets.
we make every day. We believe that our approach of gath-
ering market insights from multiple sources ensures that the
information we give our clients – our ‘house views’ – are as
objective as possible.
For the same reason, we source our wealth management
products from the industry, rather than risk introducing bias
by pushing a proprietary product suite.
We also advise our clients on how to avoid the pitfalls of
their own biases. The success of this approach comes from
understanding investor behaviour at a deeper level, so both
investors and advisors can get more decisions right, espe-
cially important in times of market turmoil.
Alexis Calla
This is why we partnered with behavioural finance experts, Chief Investment Officer and
Oxford Risk, to map nine personality traits that best de- Global Head Investment Advisory & Strategy,
scribe and explain investor behaviour. Our research reveals Group Wealth Management
4 The Standard Chartered Investor Personality Study 2020
Executive summary
Behavioural insights can help both investors and wealth advisors achieve better investment
outcomes. To get deeper insights into investor behaviour in general and specifically
in Asia, Standard Chartered worked in partnership with Oxford Risk, surveying 1,200
investors in Hong Kong, Singapore and Taiwan.
Investor archetypes unveiled
Nine personality traits
Confidence Impulsivity Speculation Composure Financial
comfort
Desire for Desire for Internal locus Risk
guidance legacy of control tolerance
From the research – which unveiled nine personality traits that shape an investor’s
personality – we established three main investor archetypes:
The Comfortable Investor The Conservative Investor The Enthusiastic Investor
Ranks high on Composure, Ranks high on Financial comfort Ranks high on Speculation,
Confidence, Internal locus of con- and Internal locus of control Impulsivity and Desire for
trol (they are less likely to believe guidance, with moderate
they control their own destiny and Composure
luck) and Financial comfort
The Standard Chartered Investor Personality Study 2020 5Personalities differ by market Brief methodology
The number of each investor type in the markets revealed Respondents: 1,200 investors, equally split between
how geographic and cultural differences shape behaviours Hong Kong, Singapore and Taiwan
and personalities. For example, Hong Kong has the highest
proportion of Enthusiastic investors. Singaporean inves- The survey – using robust behavioural and attitudi-
tors, in contrast, tend to fall into the Comfortable category. nal techniques – was the same for each respondent,
Taiwan is at the other end of the spectrum with most inves- save for the statement order, which were randomised
tors mapping to the Conservative archetype. to ensure academically reliable results.
Some other interesting differences appear within the Asian Respondents from each market contained three sub-
countries. Investors in Singapore, for example, show a rel- groups focused on affluent and high net worth (HNW)
atively stronger desire to leave a positive legacy, whereas investors:
investors in Taiwan have less interest in Speculation and a 1. 200 emerging affluent investors with around
lower Risk tolerance. Hong Kong investors are somewhat USD25k of investible wealth
higher in Impulsivity, and more likely to attribute success
to luck. But even the larger differences are not far from the 2. 150 affluent investors with around USD150k of
overall average, and for the most part financial personalities investible wealth
are reasonably constant across geographies.
3. 50 HNW investors with more than USD1M
investible wealth
Putting behavioural insights to work
Respondents represented a broad range of age, gen-
Information about individual financial personalities can help der, location, and education, and took approximately
investors and wealth advisors understand where emotional 10 minutes to answer 100 statements on a 5-point
traps lie and take steps to avoid them and stick to their scale from Strongly Disagree to Strongly Agree.
long-term plans. This can be accomplished through cus-
tomised sharing of market information, tailored assistance
with decision-making and more personalised investment
solutions, using recent progress in technology to make the
approach achievable at scale.
6 The Standard Chartered Investor Personality Study 2020Financial personalities: the nine defining
traits
The survey unveiled nine traits that best describe each investor’s financial personality, derived
from responses to a total of 25 survey statements exploring specific behavioural traits.
Scale Description What they said High scorers
tend to be...
Risk tolerance Long term willingness to “I would risk losses to get Younger
trade off increased risk of potentially greater long-term More experienced
poor outcomes for a chance gains” with investing
of greater return
Speculation Enjoyment of gambling on “I enjoy making speculative Younger
speculative investments and investments”
investing for excitement
Composure Tendency to engage emo- “I get worried when my invest- More experienced
tionally with the investment ments drop in value” with investing
journey; comfort or anxiety
Make less emotional decisions
with volatility along the way
Confidence Confidence and comfort “I am well informed about Wealthier
making financial deci- investing” More experienced
sions (distinct from actual with investing
knowledge) Male
Financial Satisfaction with, and com- “I am satisfied with my finan- Wealthier
comfort fort in, one’s financial situa- cial situation”
tion, both now and long-term
Desire for Need to share the burden of “I would feel more comforta- People who have high scores
guidance decision making with others ble if I received professional on Desire for guidance tend not
(e.g. advisors) or keep per- guidance on my investment to currently have an advisor.
sonal control of decisions decisions” They are also likely not to have
children
Impulsivity Tendency to make spur-of- “I often make financial deci-
the-moment emotionally sions quickly and regret them
driven decisions later”
Desire for Desire to leave a positive “It is important to me to leave Younger
legacy legacy and make the world a a positive legacy” With children
better place
Internal locus Conviction that success is “I believe that my success in
of control due to hard work and ability, financial investments depends
or luck on ability rather than luck”
The Standard Chartered Investor Personality Study 2020 7These nine traits helped us to identify three main archetypes:
The Comfortable Investor The Conservative Investor The Enthusiastic Investor
Scores high on Composure, Confi- Shares the relatively high Financial comfort and In many ways, the opposite of the
dence, Internal Locus of control and Internal locus of control traits of the Comfortable Conservative Investor. Scores high on
Financial comfort, but low on Impul- Investor, along with a low degree of Speculation Speculation, Impulsivity and Desire for
sivity and Speculation. More likely to and Impulsivity. However, tends not to rank high guidance, with moderate Composure.
be male than the other two arche- on Confidence, nor Composure. This archetype Has the lowest Internal locus of control.
types, and to have more previous makes up about 30 per cent of the overall investor This is the most prevalent of the arche-
investing experience. population, and likely to be more affluent inves- types, making up about 40 per cent of
tors than HNW investors. Has a relatively high the overall investor population.
investing experience and the lowest Desire for
guidance of all the archetypes
The greatest differences among these archetypes emerged among the following six traits:
Speculation Impulsivity Composure Confidence Financial Internal locus
comfort of control
Personality scores for three main archetypes:
average (5-point scale)
Difference from overall
1.0
0.5
-
(0.5)
(1.0) Internal locus
Speculation Impulsivity Composure Confidence Financial Comfort
of control
Comfortable Conservative Enthusiastic
There are also interesting comparisons across income Distribution of Composure Scores:
brackets of the emerging affluent, affluent and HNW inves-
tors surveyed. For example, as the chart below shows, the
30%
HNW investors have the highest Composure scores in com-
25%
parison to the emerging affluent and affluent investors. This
may be because emerging affluent and affluent investors 20%
have relatively fewer assets to rely on when markets get 15%
choppy. Composure however is not necessarily dependant 10%
on how much wealth an investor has: we found a substan- 5%
tial number of non-affluent individuals with high Composure 0%
scores, and many HNW investors with low scores. Low High
Non-affluent Affluent HNW
8 The Standard Chartered Investor Personality Study 2020Investor behaviour in markets
Across the affluent and HNW investor segments in Asia, our three archetypes covers most
of the survey population. While average personalities don’t vary much between countries,
the prevalence of our archetypes does alter when we move from market to market.
Interestingly, investors in Asia stand-out in their appetite Where are the Conservative clustered?
for Speculation: the enjoyment of gambling on speculative
investments and investing for excitement. Some enjoy in- Taiwan has the highest percentage of Conservative Inves-
vestment risk for its own sake rather than for the sake of tors at 44 per cent of the total base. These Conservatives
future returns. This is in stark contrast to investor behaviour are more likely to be affluent investors than HNW investors
patterns in Europe (based on previous research conduct- and have a lower risk tolerance.
ed by Oxford Risk in that region) where all investors exhibit
consistently low Speculation.
Within Hong Kong, Singapore and Taiwan, we can see the 27% 29%
impact of cultural and geographical differences in the con-
centration of each investor archetype.
Where are the Enthusiastic Investors?
At 40 per cent of the total investor base, Hong Kong has
the highest concentration of Enthusiastic Investors, who
are both relatively impulsive and speculative, and believe
in luck. This group is also represented at 30 per cent each
across Taiwan and Singapore as well. 44%
Singapore Hong Kong Taiwan
30% Where are the Comfortable residing?
40%
The Comfortable Investors are more likely to be Singa-
pore-based, male and have high investing experience. At 21
per cent of the total investor base, Hong Kong has relatively
fewer Comfortable investors.
21%
30%
47%
Singapore Hong Kong Taiwan
21%
Singapore Hong Kong Taiwan
The Standard Chartered Investor Personality Study 2020 9Top three personality traits by market
Singapore Hong Kong Taiwan
Desire for Confidence Financial Impulsivity Speculation Desire for Internal Composure Desire for
legacy comfort guidance locus of guidance
control
Average Personality Scores by Market
1.0
Difference from overall average
0.5
(5-point scale)
0.0
-0.5
(1.0)
Internal
Desire for Financial Risk Desire for
Confidence locus of Composure Speculation Impulsivity
Legacy Comfort Tolerance Guidance
Control
Singapore Hong Kong Taiwan
There is a general consistency between countries that tendency also to score high on the other, and both are more
unites Asia and Europe, reinforcing the point that these core prevalent among younger investors. However, there are also
characteristics hold across different cultures. people who have high Risk Tolerance, but low Speculation,
and vice versa.
Across our Asia population, there is a 40 per cent correla-
tion between Risk Tolerance and Speculation. Though they
are distinct scales, people who score high on one have a
10 The Standard Chartered Investor Personality Study 2020What do personality traits tell us?
The research data tells us that investors can reliably be measured on multiple dimensions,
each giving clues about their relative comfort or discomfort with a certain portfolio and/or
financial decisions they will need to make on their investment journey.
Among the nine personality traits, Risk tolerance was the For example, to take one dimension: Composure is a vital
most widely considered in the past by the wealth industry, ingredient in investment decisions because it indicates an
where it was used as a single measure of the amount of investor’s innate tendency to have emotional responses to
risk an investor should be taking. As research in behavioural short-term market fluctuations, and thus be tempted into
finance has progressed, we have come to understand that potentially costly impulsive actions.
this focus on a single variable can be misleading, given that
the nine other traits we have identified can also impact the Just as Risk tolerance tells us an investor’s willingness to
decisions of investors significantly at any given point. take risk over the long term, Composure is an indicator of
their ability to withstand volatility. Using simple questions,
By understanding investor behaviour in its entirety, advisors an investor’s Composure can be measured, and they can
can personalise investment experiences and, with a deeper get advice on how to build a portfolio more resonant with
understanding of the traits that make up their personalities, their personality.
investors themselves can watch out for their weaknesses
and play to their strengths. Advisors can use these behavioural insights to develop
ways of communicating that are more suited to each arche-
Adjusting for personality traits can reduce the tendency to type, for instance avoiding messages that may antagonise
make decisions based on excessively emotional respons- an investor with a high Composure score even though they
es. Measured using robust psychometric analysis, such as helped someone with a low Composure score avoid a pan-
the sort used in this study, these traits tend to change only icked response. So, the ability to personalise advice can
gradually and minimally in individuals over time. help avoid sub-optimal responses from investors.
This consistency makes personality measures a powerful
way of understanding what to do differently for each inves-
tor, not just at the time of measurement, so they can be
applied to a long-term investment strategy for an individual.
The
The Standard
Standard Chartered
Chartered Investor
Investor Personality
Personality Study
Study 2020
2020 11
11The value of hyper-personalisation
With accurate knowledge about individual financial personalities investors and wealth
advisors can know ahead of time where emotional traps lie and take steps to stick to their
long-term plans. This can be accomplished by personalising the following:
• Investments: Personalising the choice of investment • Decisions: Depending on their personality type, inves-
products to increase an investor’s comfort with a port- tors need different levels of assistance with their in-
folio. For example, e.g. investors that score high on vestment decisions. The frequency of engagement or
Speculation are likely to prefer investments with a high “hand-holding” in times of market stress, for instance,
potential payoff and a strong narrative, rather than safer can vary. Investors with high scores on Desire for guid-
blue-chip stocks. Personality-led changes to portfolios ance will find frequent hand-holding appealing. Investors
can help with making investors more comfortable over with relatively lower Confidence scores prefer a clear
the long-term. Examples include capping exposure to recommendation to a choice between complex options
volatile assets for an investor with low Composure or from their advisor
avoiding complex assets for an investor who has a low
The practical applications of understanding financial per-
Confidence score
sonalities extend beyond product recommendations and
• Information: If advisors adopt communication styles and changes to investment portfolios. These nuanced insights
messages that account for individual personality traits, can even be used to change how an investor feels about
they can help investors avoid emotional reactions to their portfolio without even changing the portfolio itself.
their portfolio information. For example, an investor with Depending on the investor archetype, even simple steps
low Composure would benefit from less frequent and such as tailoring the layout of investment reports can help
less detailed reporting of their portfolio performance make an investor more comfortable with their portfolio and
its performance.
Personality-based prescription – an example
In times of market turmoil, responds In times of market turmoil, responds In times of market turmoil, responds
better to messages that: better to messages that: better to messages that:
Focus on the ability of human skill to Convey clear investing and deci- Are high-level, rather than investor-spe-
deal with the situation and to defer de- sion-making principles cific, zooming out to keep short-term
cision-making to agreed processes volatility in the context of longer-term
planning
The Comfortable Investor The Conservative Investor The Enthusiastic Investor
• Scores high on Composure, Confi- • Scores relatively high on Finan- • Scores high on Speculation, and
dence and Financial comfort, and cial comfort and Internal locus of Impulsivity
Internal locus of control control • Tends to be less experienced and
• Tends to be a more experienced • Does not take too many chances would benefit from a pre-agreed
investor and would like to have clear invest- strategy
• Likely to stay relatively calm and ing and decision-making principles • More likely to speculate in times of
make reasonable decisions in tur- • Less likely to invest in volatile port- market turmoil
bulent times folios or look for guidance during • Would benefit from setting aside
• Scores low on Speculation and times of extreme turmoil a portion of their wealth to satisfy
Impulsivity • Less likely to make speculative trading impulses without jeopardising
moves but would benefit from es- their entire wealth
tablishing a contingency plan
12 The Standard Chartered Investor Personality Study 2020Can technology hyper-personalise
advisory at scale?
Technology is key to putting personality insights to work at scale. It is possible to build
decision-enhancing tools to guide clients to better decisions by using emerging technologies
such as artificial intelligence (AI).
A human being cannot process all the data required to That’s where AI comes in. Over the weekend, when human
keep on top of all the variables that shape the behaviour advisors are off duty, the behavioural AI has been determin-
of an investor. Responding to each investor’s unique, empir- ing the impact on every client’s investment portfolio. It con-
ically accurate, and stable personality profile in continually siders their scores across all nine personality traits, their
changing circumstances can only be possible if human ad- communication preferences and how frequently they have
visors use the power of digital tools. been checking their portfolio performance.
The role of these tools is not to replace human advisors - as Armed with this information, the system churns out scores
many fear - but to free them to focus on what they do best for each client and provides a personalised list of the best
– understanding individuals’ aspirations and fears, navigat- actions to their advisor. This helps advisors determine which
ing ambiguity, and being agile in how they help investors clients to reach out to first, in order of risk and urgency. So,
respond. assisted by technology, each investor gets a response from
their advisor that is uniquely relevant to their financial per-
Consider a scenario where markets have plunged through sonality and portfolio, enabling them to make most optimal
the week and everyone is waiting nervously over the and objective decision about their portfolio.
weekend to see what happens when they open on Mon-
day. Advisors know they’re going to be frantically busy With technology and personality insights, we enable a
trying to have just the right conversations with each of deeper understanding of investors, so experts can deliver
their many clients. Different investors will react in different advice recognising people as they actually are, not how we
ways, and the market drop will have very different effects perceive them to be.
on their portfolios. Across many hundreds, or even thou-
sands of clients how can a wealth management organisa-
tion prioritise how to help everyone stay calm and avoid
rash decisions?
The Standard Chartered Investor Personality Study 2020 13Credits
The Standard Chartered Investor Personality Report is based on research and analysis by behavioural finance experts,
Oxford Risk – www.oxfordrisk.com
Disclosures
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16 The Standard Chartered Investor Personality Study 2020not constitute an offer, solicitation or invitation to transact document is not, nor is it intended to be (i) an offer or solic-
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The products described in this document are not deposits Relevant information on our Shariah Supervisory Commit-
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