Understanding what drives the purchase decision in pension and investment products

Abstract

The aims of this paper are to fi rst seek an understanding of consumer decision-making when purchasing pension and investment products, and second to ascertain how this decision-making affects the consumer ' s choice of distribution route. The study employed both focus groups and postal questionnaire survey methods based on the framework of a classical decision-making model that investigated problem recognition, information search, evaluation tools used and post-purchase. The fi ndings show that the decision-making process experience differed to a lesser or greater degree depending on the distribution route. The majority of respondents had recognised the need to make a purchase decision long before seeking information. Younger respondents on all incomes believed that they must make some pension provision for themselves as opposed to relying on the government ' s retirement provision. Many changed channels for information searches, but tended to settle with the Independent Financial Adviser (IFA). The two main evaluation tools for pension and investment were found to be the ' charges ' and ' historic fund performance ' . The vast majority of respondents reiterated their worry that the outcomes would not be known until retirement. In terms of analysis by the level of ' fi nancial literacy ' , respondents who scored in the upper quartile were more inclined to be on a higher income, less inclined to evaluate on charges and more proactive in discussing the investment strategy of their pension fund. Respondents who scored in the lower quartile had opposite results. One of the implications of these fi ndings is that the younger respondents ' recognition of pension savings favours the government ' s intention to reverse the existing balance of pension distribution. The other main implication is that the fi ndings will be of help to managers in appreciating the dominance of the IFA channel by providing an explanation of why consumers choose this route, and, additionally, can assist direct marketing managers in identifying customers who will be more likely to use multichannel or single-channel shoppers. It can also help the marketing manager increase the usage of different channels by addressing the factors driving the purchase decision and distribution choice.

Buying CSR with employees’ pensions? The effect of social responsible investments on Norwegian SMEs’ choice of pension fund management

“…shows that in many respects, Norway is similar to other countries with respect to pension issues (Gough and Nurullah, 2009;Harrison et al, 2006;Hauff, 2014 employees. This arrangement requires the employers to set aside a monthly deposit of at least 2% of the employees' wages.…”

“…Therefore, buyers may infer the suppliers' management quality by the suppliers' investments in credible corporate brand names (Akerlof, 1970;Gough and Nurullah, 2009;Kirmani and Rao, 2000;Kotler and Pfoertsch, 2007).…”

“…Previous research on pension purchasing behavior has examined this issue from an individual consumer perspective with an emphasis on knowledge and information search (e.g., Gough and Nurullah, 2009;Harrison et al, 2006;Hauff, 2014) or among sophisticated professional buyers (Chartered Financial Analysts -CFAs) with emphasize on relationship establishment and maintenance (e.g., Strieter and Singh, 2005). Furthermore, previous research on SRI has been examined from individual investors' perspective in pre and post purchase situations with focus on financial and social criteria for choices and evaluations (e.g., Barreda-Tarrazona et al, 2011;Nilsson et al, 2014;Nilsson et al, 2010).…”

“…Although the literature is ambiguous on whether SRI and CSR are compatible with long-term value maximization (e.g., Karnani, 2011;Peylo, 2014;Rivoli and Waddock, 2011;Waddock and Graves, 1997), empirical studies show that financial investments essentially are guided by return, diversification and short and long-term performance (e.g., Barreda-Tarrazona et al, 2011;Benson et al, 2006;Berk and Green, 2004;Gough and Nurullah, 2009). Even SR investors invest in mutual funds, rather than give money to charity to enhance their financial utility as they expect positive risk-adjusted returns on their investments (Renneboog et al, 2008a).…”

“…More specifically, pension fund managers may build a credible quality reputation through investments in their corporate brand names. Dissemination of corporate brand names conveys information about the companies' quality, skills, and behavior (Gough and Nurullah, 2009;Homburg et al, 2010;Kotler and Pfoertsch, 2007). As an example, Jordan and Kaas (2002) show that credible corporate brand names reduce investors' perceived risk.…”