Consumer Perceptions of Financial Risk

Diacon, Stephen; Ennew, Christine

doi:10.1111/1468-0440.00125

Cited by 55 publications

(44 citation statements)

References 17 publications

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“…Different trustees frame different trust aspects. In the financial context, trust construct is usually conceptualised and operationalised as investors' trust in such parties/subjects as financial services providers (Diacon & Ennew 2001;Redhead 2011), financial advisers (Redhead 2011), financial advice of professionals (Georgarakos & Inderst 2011), the stock market (Redhead 2011;Sapienza & Zingales 2012), and large corporations, the Government, banks (Sapienza & Zingales 2012). Consistent with the research context, this study takes a broad view of client trust to include: (1) the financial adviser, (2) the financial advice provided, and (3) the adviser's institution.…”

Section: Determinants Of Financial Risk Tolerance: Trust Relationshimentioning

confidence: 99%

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Nguyen¹,

Gallery²,

Newton³

2016

AABFJ

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Client risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decision-making. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. KeywordsRisk tolerance, individual investment decisions, client-adviser relationship, financial advice context, financial planning AbstractClient risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decisionmaking. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. JEL Classification: D14

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Section: Determinants Of Financial Risk Tolerance: Trust Relationshimentioning

confidence: 99%

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Nguyen¹,

Gallery²,

Newton³

2016

AABFJ

View full text Add to dashboard Cite

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“…Capon et al, 1994Capon et al, , 1996Diacon and Ennew, 2001). As mentioned above, classic economic theory states that risk and return are positively correlated (MacGregor et al, 1999).…”

Section: Investment Risk Of Srimentioning

confidence: 99%

“…As mentioned above, classic economic theory states that risk and return are positively correlated (MacGregor et al, 1999). However, the literature on risk separates ''objective'' theoretical notions of financial risk (usually thought of as the volatility of yields), and the subjective perception of risk held by the individual investor (Diacon, 2004;Diacon and Ennew, 2001). The subjective perception of risk in mutual funds is largely based on attitudes and feelings, and has been argued to be influenced by the possible (disastrous) consequences of a poor investment decision and high levels of uncertainty (Byrne, 2005;MacGregor et al, 1999).…”

Section: Investment Risk Of Srimentioning

confidence: 99%

Investment with a Conscience: Examining the Impact of Pro-Social Attitudes and Perceived Financial Performance on Socially Responsible Investment Behavior

2007

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“…Goodman (2004) suggests that consumers don't have the time, inclination or aptitude for Wnance, while at the same time they worry extensively about their Wnancial welfare and its management. Individual perceptions of risk are clearly relevant in making investment fund choices (Diacon & Ennew, 2001;Jordan & Kaas, 2002;Wärneryd, 2001). A comprehensive review of the lessons from behavioral Wnance research can be found in Mitchell and Utkus (2004).…”

Section: Investors Use Of Prior Performance Datamentioning

confidence: 99%

Framing effects and risk perception: The effect of prior performance presentation format on investment fund choice

Diacon

Hasseldine

2007

Journal of Economic Psychology

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Consumer Perceptions of Financial Risk

Cited by 55 publications

References 17 publications

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Investment with a Conscience: Examining the Impact of Pro-Social Attitudes and Perceived Financial Performance on Socially Responsible Investment Behavior

Framing effects and risk perception: The effect of prior performance presentation format on investment fund choice

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