Factors influencing investor choice of retirement funds

Author： Lee Allan Xu Yingzi Hyde Kenneth F

ISSN： 1479-1846

Source： Journal of Financial Services Marketing, Vol.18, Iss.2, 2013-06, pp. : 137-151

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Abstract

This article seeks to identify the key factors influencing consumer choice of retirement investment fund in a legislative environment with an auto-enrolment retirement regime. Age-specific focus group discussions are conducted. Multiple sources of evidence are considered including transcripts of focus group discussions, participant ranking of influencing factors and data on actual fund choice. Thematic analysis is applied to the qualitative data set. Five factors are identified as most important in consumer choice of retirement investment fund: attitude to financial risk, perceived time to retirement, advice from family, friends and colleagues, information from providers and the media, and knowledge of investing. Three lesser factors are also identified: involvement in financial planning, ethical concerns in choice of investment options and other assets held by the consumer. Overriding all of these is the considerable impact of the default investment scheme presented to consumers in the auto-enrolment regime. Choice of retirement investment fund appears a low effort decision for most research participants; by default, many consumers invest in conservative retirement funds. There is a role for government regulators to guide consumers to age-appropriate default schemes that vary in their growth/risk potential. Fund providers are encouraged to provide more complete and understandable performance information and reporting on funds. Future research should consider the impact of financial literacy on consumer fund choice.